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Author: DeltaOne81 Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35357  
Subject: Re: Yield-Math Madness Date: 6/21/2006 10:39 AM
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Why? Is it because the market is taking a dim view of their credit quality?

This is what my one and only real concern is. After just starting to get into T-Bills for a good portion of my efund, I realize, "wait, I have $4K set aside for my 2007 Roth, why not buy a 6 month T-bill for that too. The ones offered next week would mature right at the end of the year, which is perfect." And then I think "gee, I'm starting to rely a fair deal on the credit quality of the US Gov't, which isn't exactly in the greatest of financial shape right now".

But I suppose being worried about that on a 6 month time frame is starting to get a little paranoid. And considering we're only talking about being equal to AAA or so right now, thats not exactly poor. BRK, PFE, and a few others right, aren't exactly places that are going to disappear overnight.

I also tried to look for CDs, but the best 6 month I can find is a 5.4%-5.5% from eTrade. Not equivalent, and I don't feel like opening a new account anyway.


Why does anyone ask more for their money? Because they are worried was the only reasonable reply. Why are they worried? Who knows? But if they're worried, they are going to act in ways that people don't who aren't worried. And what does a fear-driven market do? It trashes everything senselessly. That creates opportunities, but it also does a lot of damage, especially if the fear gets out of hand and then attempts to stem the fears also over-react, in the way that back-burning often creates more damage that the fire it was intended to control. I don't think we are there yet. The market is unsettled, but not disorderly. A bit manic, but not panicky. People have an eye on the door and are maybe edging toward it, but the rush hasn't yet started.

So really you're saying that this may not bode well for the stock market, not the bond market or Treasuries, right? Yes, a bad market can impact bonds, but typically mainly of lower quality, and not treasuries.


Btw, one last thought. It seems to me from just the past couple weeks that - well, at last in a rising rate environment - the Treasury Auctions usually come out to a few beeps above the last yield listed on sites like Bloomberg. I guess this makes sense as they've just sent more debt out into the market. While I understand nothing is 100%, is this a real pattern I've noticed, or just randomness I've mistaken for one?

Thanks,

Fred
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