< HOME  Wednesday, May 24, 2006

Bondbuyers expect Interest Plus TIPS

Just when you thought the US financial system cannot possibly get more absurd . . .

The US Treasury not only shovels billions upon billions in interest to bondbuyers who don't lift a finger to deserve it, but now they intend to increase the issue of inflation protected securities from the current 8 percent of the nation's debt portfolio upto 13 percent.

Bondbuyers are simply NOT prepared to shoulder ANY RISK WHATSOEVER that their UNEARNED money will devalue, even though inflation is a DIRECT result of their voracious greed.
The U.S. Treasury's issuance of inflation-protected securities (TIPS) is likely to increase as a share of the government debt portfolio, a Treasury Department official said on Wednesday.

"We do not announce future issuance ahead of time, but projections of issuance based on current auction sizes and frequencies would lead to TIPS as a share of the portfolio reaching 13 percent in 2011 from 8 percent now," Treasury Assistant Secretary Emil Henry said in remarks prepared for delivery to a conference in Paris.

Henry's remarks were distributed by the Treasury Department in Washington.

Demand for Treasury inflation-linked securities is strong as seen from the growing market for such securities, Henry said. There are currently over $300 billion of TIPS outstanding and about $800 billion of inflation-indexed securities worldwide, he said.

Liquidity in the TIPS market is improving, Henry said. Daily turnover in TIPS has more than doubled over the three years 2002-2005, he said.
Of course! Why "buy" a bond subject to inflation, when you can buy one protected from it? Are there ANY drawbacks to this no-brainer?
If the U.S. economy suffered from deflation, then these securities wouldn't be very useful.
Recall the last time the US economy suffered from deflation - NEVER. Central bankers won't let it happen. They make their money by inflating! To them, deflation is the anti-christ.

TIPS are a no-brainer, alright - it requires a government with NO BRAINS to ISSUE them.


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