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A child's cry touches a father's heart, and our King is the Father of his people. If we can do no more than cry it will bring omnipotence to our aid. A cry is the native language of a spiritually needy soul; it has done with fine phrases and long orations, and it takes to sobs and moans; and so, indeed, it grasps the most potent of all weapons, for heaven always yields to such artillery.
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Charles Haddon Spurgeon (The Treasury of David: Spurgeon's Classic Work on the Psalms)
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When foreign military spending [bombing Korea and Vietnam] forced the U.S. balance of payments into deficit and drove the United States off gold in 1971, central banks were left without the traditional asset used to settle payments imbalances. The alternative by default was to invest their subsequent payments inflows in U.S. Treasury bonds, as if these still were “as good as gold.” Central banks have been holding some $4 trillion of these bonds in their international reserves for the past few years — and these loans have financed most of the U.S. Government’s domestic budget deficits for over three decades. Given the fact that about half of U.S. Government discretionary spending is for military operations — including more than 750 foreign military bases and increasingly expensive operations in the oil-producing and transporting countries — the international financial system is organized in a way that finances the Pentagon, along with U.S. buyouts of foreign assets expected to yield much more than the Treasury bonds that foreign central banks hold.
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Michael Hudson (The Bubble and Beyond)
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if the strategy is a long–short dollar-neutral strategy (i.e., the portfolio holds long and short positions with equal capital), then 10 percent is quite a good return, because then the benchmark of comparison is not the market index, but a riskless asset such as the yield of the three-month US Treasury bill (which at the time of this writing is just about zero percent).
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Ernest P. Chan (Quantitative Trading: How to Build Your Own Algorithmic Trading Business (Wiley Trading))
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Treasury securities issued with a maturity of one year or less are called “bills”; from one to 10 years, “notes”; and over 10 years, “bonds.” Notes and bonds yield an interest coupon every six months. Bills do not—rather, they are issued at a discount and redeemed at par; the difference is their “yield.”)
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William J. Bernstein (The Investor's Manifesto: Preparing for Prosperity, Armageddon, and Everything in Between)
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There’s a price to be paid for liquidity and it’s reflected in the security’s yield. The yield of the current issue is always a little bit lower than other Treasury issues with similar maturities. That’s what’s called the liquidity premium. When investors buy the current issue, they are giving up a little yield in order own the current, which they can buy and sell with smaller bid/offer spreads, and there’s plenty of liquidity to move large sizes. However, this liquidity premium fades over time.
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Scott E.D. Skyrm (The Repo Market, Shorts, Shortages, and Squeezes)
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It’s importance, however, is bigger than that. Treasury securities are the risk-free yield curve for all of the financial markets. That’s right, the yields of Treasury Bills, Notes, and Bonds from overnight to 30 years make up a yield curve that is used to price all other fixed-income securities. The Treasury market is the reference rate for interest rates. Treasurys are a tool for pricing corporate bonds, municipal bonds, emerging market bonds, federal agencies, mortgage-backed securities, and other dollar assets. On top of that, they’re also a tool for speculation and hedging risk.
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Scott E.D. Skyrm (The Repo Market, Shorts, Shortages, and Squeezes)
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In theory, the liquidity premium is reflected in the Repo rate. If the current 2 Year Note has a yield of 1.00% and the off-the-run (older) issues of the same maturity have a yield of 1.02%, it means the current issue has a two basis point premium. That’s a 0.02% lower yield than other equivalent maturity Treasurys. Of course, now you’re asking, “Why not just short sell the current 2 Year Note, buy an older issue with the same maturity, and pocket the liquidity premium when the next current issue is announced?” Yes, that’s possible, but that liquidity premium is also reflected in the Repo rate. The Repo rate to borrow the current issue will be lower than the Repo rate to loan the other, older issues. Basically, the difference between the Repo rates for the current 2 Year Note and the off-the-run issues will generally equal the liquidity premium. That’s part of the math in the Treasury market. It usually works that way, but not always.
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Scott E.D. Skyrm (The Repo Market, Shorts, Shortages, and Squeezes)
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The securities lending business boils down to one concept: exchanging a security that someone needs for a different security or cash. The business is driven by the need of the dealer community to cover short positions, be it in stocks, Treasurys, agencies, corporate bonds, ADRs, or even ETFs. When a dealer is looking to cover a short position, they first check what are colloquially known as the “sec lenders.” The securities lending group will pull the security out of the end-user portfolio and lend it into the Repo market. When a securities lending group loans a security, they either receive cash or bonds in return. If they receive cash, they reinvest the cash. If they receive a bond, they earn a fee on the spread between where they loan the bond and borrow the other. In the case of cash, they need to invest it. They need an investment that generates a sufficient return to make the business viable, yet, at the same time, without taking too much risk. The safest and easiest way to invest is in overnight Treasury repo. The problem is that there’s very little profit lending a Treasury and reinvesting in a Treasury. In order to enhance returns, the securities lending groups take some risk. It’s not necessarily a lot of risk, but increasing returns involves increasing risk. It can be either interest rate risk, credit risk, or liquidity risk. Technically a combination of all three is possible, too, but that’s pretty dangerous. The yield curve is upward sloping most of the time, so investing for a longer period of time generally generates a higher yield. Let’s say the overnight rate is 2.00%, the one-month rate is 2.05%, and the three-month rate is at 2.15%. Instead of reinvesting cash overnight, there’s an extra 15 basis points for investing for three months. Since the end-investor clients usually hold their bonds to maturity, there’s only a small chance they will sell a bond during that three-month period. On top of that, the securities lending groups run multi-billion dollar portfolios, so they can ladder their investments.
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Scott E.D. Skyrm (The Repo Market, Shorts, Shortages, and Squeezes)
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Fram would not yield them a penny, and sent to them instead the teeth of Scatha made into a necklace, saying: “Jewels such as these you will not match in your treasuries, for they are hard to come by.” Some say that the Dwarves slew Fram for this insult. There was no great love between Éothéod and the Dwarves.
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J.R.R. Tolkien (The Lord Of The Rings: One Volume)
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As monthly mortgage payments rose for home buyers over the past several years as a result of higher mortgage rates (coupled to increasing home prices), what simultaneously so too did rise were earned income opportunities for bondholders. Bondholders benefitted…at the expense of home buyers.
If the Fed does indeed enact two rate cuts through the end of 2024, mortgage rates are likely to drop. As too will yields bondholders attain, through their purchase of newly-issued 10-year Treasuries.
A trade-off is in the making. A much-welcomed rebalancing.
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Ted Ihde, Thinking About Becoming A Real Estate Developer?
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credit spread. This is a measurement between the yield of U.S. Treasury bonds, which carry the smallest possible risk, and the yield of a publicly traded corporate bond.
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Lawrence G. McDonald (A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers)
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The credit spread refers to the difference between Treasuries, which were paying around 4.5 percent, and the yields of corporate bonds and the mortgage-backed securities, which were probably around 7 to 8 percent.
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Lawrence G. McDonald (A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers)
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My fruit is p better than q gold, even fine gold, and my yield than r choice silver. 20 I walk in the way of righteousness, in the paths of justice, 21 granting an inheritance to those who love me, and filling their treasuries. 22[^] [†] s “The LORD t possessed [2] me at the beginning of his work, [3] the first of his acts u of old. 23 Ages ago I was v set up, at the first, w before the beginning of the earth. 24 When there were no x depths I was y brought forth, when there were no springs abounding with water. 25 Before the mountains z had been shaped, a before the hills, I was brought forth, 26 before he had made the earth with its fields, or the first of the dust of the world. 27 When he b established the heavens, I was there; when he drew c a circle on the face of the deep, 28 when he d made firm the skies above, when he established [4] the fountains of the deep, 29 when he e assigned to the sea its f limit, so that the waters might not transgress his command, when he marked out g the foundations of the earth, 30 then h I was beside him, like a master workman, and I was daily his [5] i delight, rejoicing before him always, 31 j rejoicing in his k inhabited world and delighting in the children of man.
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Anonymous (ESV Study Bible)
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Mortgage securities. Pooled together from thousands of mortgages around the United States, these bonds are issued by agencies like the Federal National Mortgage Association (“Fannie Mae”) or the Government National Mortgage Association (“Ginnie Mae”). However, they are not backed by the U.S. Treasury, so they sell at higher yields to reflect their greater risk. Mortgage bonds generally underperform when interest rates fall and bomb when rates rise. (Over the long run, those swings tend to even out and the higher average yields pay off.) Good mortgage-bond funds are available from Vanguard, Fidelity, and Pimco. But if a broker ever tries to sell you an individual mortgage bond or “CMO,” tell him you are late for an appointment with your proctologist.
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Benjamin Graham (The Intelligent Investor)
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The U.S. 10-year Treasury yield US10YT=RR touched a two-month top at 2.20 percent having climbed from 1.92 percent in little more than a week.
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Anonymous
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In fact, for someone in the highest tax bracket, short-term Treasury bills have yielded a negative after-tax real return since 1871, even lower if state and local taxes are taken into account. In contrast, top-bracket taxable investors would have increased their purchasing power in stocks 288-fold over the same period.
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Jeremy J. Siegel (Stocks for the Long Run: The Definitive Guide to Financial Market Returns & Long-Term Investment Strategies)
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The highest-risk investments include: Futures Commodities Limited partnerships Collectibles Rental real estate Penny stocks (stocks that cost less than $5 per share) Speculative stocks (such as stock in new companies) Foreign stocks from volatile nations “Junk” (or high-yield corporate) bonds Moderate-risk investments include: Growth stocks (companies that reinvest most of their profits to grow the business) Corporate bonds with lower (but still investment-grade) ratings Mutual funds or exchange-traded funds (ETFs) Real estate investment trusts (REITs) Blue chip stocks Limited-risk investments include: Top-rated investment-grade corporate and municipal bonds The lowest-risk investments include: Treasury bills and bonds FDIC-insured bank CDs (certificates of deposit) Money market funds Practicing
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Alfred Mill (Personal Finance 101: From Saving and Investing to Taxes and Loans, an Essential Primer on Personal Finance (Adams 101 Series))
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They didn't like what they found. Further examination found an active LIBOR fixing ring,[18] led by two large global banks and their inter-dealer brokers.[19] With no way to replace the survey method without the chance of rigging reoccurring, global regulators agreed to scrap LIBOR altogether. The problem was finding a replacement. It’s important to understand what LIBOR actually represents. Yes, it represents bank funding costs, but what does that mean? Theoretically, there are two interest rate components that make up LIBOR. The general level of risk-free interest rates and a credit spread. The risk-free interest rate is the equivalent of the U.S. Treasury yield with the same maturity date. The credit spread component represents something like the probability that the bank might default before the maturity date.
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Scott E.D. Skyrm (The Repo Market, Shorts, Shortages, and Squeezes)
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From 1979 through 1982 there were extreme distortions in the markets. Short-term US Treasury bill returns went into double-digit territory, yielding almost 15 percent in 1981. The interest on fixed-rate home mortgages peaked at more than 18 percent per year. Inflation was not far behind.
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Edward O. Thorp (A Man for All Markets: From Las Vegas to Wall Street, How I Beat the Dealer and the Market)
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once the issue settled, Tiger and Quantum agreed to have Salomon manage their positions. Salomon had complete control of the entire 2 Year Note. By the middle of May, it was clear there was something wrong. The 2 Year Note’s price was completely distorted; it was trading extremely rich and the yield was extremely low. There was no squeeze in the Repo market, however, because Salomon loaned the securities into the market each day. This created one of the strangest squeezes ever. There was no shortage in the Repo market, but there was a huge premium in the cash market. As the squeeze in the April 2 Year Note continued, Salomon submitted large bids again for the next 2 Year Note settling at the end of May. They were able to accumulate an abnormally large position once again. Prices across the entire 2 year sector were now distorted. Prices were abnormally high and yields were abnormally low. Everyone knew that Salomon had the issue and Salomon was not selling. At this point, all of the trading in the market was from one short seller to another. There were no real owners selling. All of the buyers were existing short-sellers who had ridden their losses as far as they could go and got stopped out. All of the sellers were new short-sellers willing to take short positions and higher and higher prices. There was no way for the squeeze to end without Salomon selling. What was Salomon’s goal? They had already achieved a very successful squeeze. Prices moved in their favor and they had a huge win under their belt. The biggest short-squeeze of all time! However, in July things started to unravel. Market participants started complaining to the Fed. Everyone knew that Salomon owned the entire issue. The Fed passed the information to the Treasury Department. Treasury then passed it to the SEC, who immediately launched an investigation. By the end of July, it was all over.
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Scott E.D. Skyrm (The Repo Market, Shorts, Shortages, and Squeezes)
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There’s a theory that Treasury yields can be broken down into two components: the expected future path of overnight interest rates and the “term premium.” What’s that? Technically, the term premium is extra yield the investor receives for holding longer-term securities. The return is not just the average of the overnight rates, but a little extra yield just for holding the security for a longer period of time.
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Scott E.D. Skyrm (The Repo Market, Shorts, Shortages, and Squeezes)
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Except for short-term buying and selling imbalances, Treasury yields are based on the expected path of interest rates.
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Scott E.D. Skyrm (The Repo Market, Shorts, Shortages, and Squeezes)
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High-yield bonds—which Graham calls “second-grade” or “lower-grade” and today are called “junk bonds”—get a brisk thumbs-down from Graham. In his day, it was too costly and cumbersome for an individual investor to diversify away the risks of default.;1 (To learn how bad a default can be, and how carelessly even “sophisticated” professional bond investors can buy into one, see the sidebar on p. 146.) Today, however, more than 130 mutual funds specialize in junk bonds. These funds buy junk by the cartload; they hold dozens of different bonds. That mitigates Graham’s complaints about the difficulty of diversifying. (However, his bias against high-yield preferred stock remains valid, since there remains no cheap and widely available way to spread their risks.) Since 1978, an annual average of 4.4% of the junk-bond market has gone into default—but, even after those defaults, junk bonds have still produced an annualized return of 10.5%, versus 8.6% for 10-year U.S. Treasury bonds.2 Unfortunately, most junk-bond funds charge high fees and do a poor job of preserving the original principal amount of your investment. A junk fund could be appropriate if you are retired, are looking for extra monthly income to supplement your pension, and can tolerate temporary tumbles in value. If you work at a bank or other financial company, a sharp rise in interest rates could limit your raise or even threaten your job security—so a junk fund, which tends to outper-forms most other bond funds when interest rates rise, might make sense as a counterweight in your 401(k). A junk-bond fund, though, is only a minor option—not an obligation—for the intelligent investor.
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Benjamin Graham (The Intelligent Investor)
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Unto the end of the world.” Venantius Fortunatus eleven hundred years ago witnesses to the peregrinations of Paul the apostle. He passed the ocean’s curled wave,
As far as islands harbours have;
As far as Brittain yields a bay,
Or Iceland’s frozen shore a stay.
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Charles Haddon Spurgeon (The Treasury of David)
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Verse 4.—“Unto the end of the world.” Venantius Fortunatus eleven hundred years ago witnesses to the peregrinations of Paul the apostle. He passed the ocean’s curled wave,
As far as islands harbours have;
As far as Brittain yields a bay,
Or Iceland’s frozen shore a stay. John Cragge, 1557.
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Charles Haddon Spurgeon (The Treasury of David)
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Of his son, Fram, they tell that he slew Scatha, the great dragon of Ered Mithrin, and the land had peace from the long-worms afterwards. Thus Fram won great wealth, but was at feud with the Dwarves, who claimed the hoard of Scatha. Fram would not yield them a penny, and sent to them instead the teeth of Scatha made into a necklace, saying: “Jewels such as these you will not match in your treasuries, for they are hard to come by.” Some say that the Dwarves slew Fram for this insult. There was no great love between Éothéod and the Dwarves.
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J.R.R. Tolkien (The Return of the King (The Lord of the Rings, #3))