Category: Markets

MIT Issues Rare 100-Year Bond: The Massachusetts Institute of Technology came to market Wednesday with a $750 million taxable bond offering maturing in 100 years, according to people familiar with the deal. Bonds of that length are extremely rare, although universities–including Yale and Boston University–have issued so-called ‘century bonds’ in the past. With interest rates near all-time lows, ultra-long-term debt is a favorable option for issuers; and with risk premiums between 10-year and longer-dated debt narrowing, borrowers, especially AAA-rated ones like MIT, can fund themselves cheaply over extended periods. Pricing offered on the MIT deal as of its launch Wednesday was 1.30 percentage points over 30-year government bonds, according to the people familiar with it. That was lower than initial

Continue reading

To add to my prior posts on the S&P “Downgrade” and treasury shorting, here are a few additional thoughts and links: Via Ezra Klein, more on why the end of quantitative easing is bad for treasury prices: The dominant view among liberals is that the low, low yields on Treasurys reflect the market’s serene confidence that America will make good on its debts. But some of the investors and economists I spoke to while reporting out my piece on the debt ceiling disagreed. PIMCO’s Bill Gross and former-Reagan budget director David Stockman both think Treasurys look safer than they are because the central bank, as part of quantitative easing, is buying up so many of them. “There’s a terrible mispricing of

Continue reading

In response to my last post on the S&P “downgrade,” Matt asks, “Well?  Why are you short treasuries?” Fair question. A couple very simple reasons (with slightly detailed explanations). First off, this is not investment advice! Now that I really think it through, there are actually two and a half reasons I’m short treasuries. The first two reasons are based on my market outlook and expectations of monetary policy. I’ll start with these. 1.) Short term interest rates have essentially been at zero percent since December 2008. That’s more than two years, and is unprecedented. Given that we experienced an unprecedented recession (unprecedented at least in recent memory), sustained low interest rates were absolutely the correct policy. In fact, according to Paul Krugman’s

Continue reading

James Fallows summarizes two thoughts that pretty much summarize my thoughts on the topic: I agree with Clive Crook’s puzzlement about the S&P downgrade “bombshell” today: “S&P adduces no new information that I can see. Competent ratings of opaque instruments such as, oh, mortgage-backed securities would be very useful to investors (not that ratings agencies troubled to provide competent ratings in that case, obviously). But why should anybody need that kind of help in judging the soundness of US government bonds? S&P knows nothing about them that you or I don’t know.” And I like James K. Galbraith’s derisive guffaw, as reported by Dave Lindorff: At least one economist burst out laughing on hearing about the S&P announcement. “They did what?” exclaimed James Galbraith, a

Continue reading

For a while now I’ve been curious to see a time-series chart of global stock market capitalization by region. I’ve looked, and have been unable to find one. So I downloaded some data from the World Federation of Exchanges, and made my own. Whenever someone says “the world stock market,” this is what they’re talking about: And in real 2010 dollars:

I’m not sure how many of my readers will find this interesting, but I did. Even though the stock market has practically doubled in value since the low in March 2009, when evaluating cumulative returns over the prior 10-year period, we’re only up 1.4%. Which is in the lowest decile of quarterly cumulative 10 year returns over the period 1926-2010. One could interpret this to imply that the market still has a ways to go.