Who here understands the DRASTIC effect refusing to raise the debt ceiling will have on the market?

[Eliot Rosewater]

I think if more people understood what is about to happen ON PURPOSE by the GOP they would pull 401K, IRA everything out of the market for a short term.


What is about to happen is unprecedented, isn't it? Has the debt ceiling ever not been raised?

[jmbar2]

1. It has caused a 50% drop in my small brokerage account over the past few days.

I had a lot of SPY call options, which tend to react badly to stock drops.

Stomach-churning. McConnell is a terrorist autocrat.

[Eliot Rosewater]

4. Yes, just the last 2 days is bad enough but I suspect the next few weeks to be brutal.

[Walleye]

2. The turtle couldn't be happier. He said he took no responsibility for what would happen

[Eliot Rosewater]

5. The question is how much are his billionaire owners willing to suffer

for the goal of destroying Biden and can average people like us survive that?

[TheRealNorth]

13. I have a sneaky suspicion....

That there is a lot of insider trading going on the Republican side.

[I_UndergroundPanther]

9. Turtle is a psychopath

Of course he takes no responsibility, for what he causes..even though he is 100% guilty of causing this crisis.

psychopaths need to be identified and kept out of public service ,medicine and government.

In my dreams they would be dumped on an island to survive or die,preferably to die.

[C_U_L8R]

10. Republican Dine and Dash aka GOP Chew and Screw

"Who us? We didn't eat that bazillion dollar meal and run out the door!!! Nuh-uh. Nevermind our gorged gullets and overstuffed pockets."

[Walleye]

12. I think it's something like Theft of services, a crime

[Doodley]

3. I understand. My pension fund has dropped 10k in ONE DAY.

[Eliot Rosewater]

6. I have to consider pulling it all out for a few weeks. Broker can put it in a simple

interest bearing account.

[wnylib]

7. That's the whole point, isn't it?

Saddle Biden with a market collapse, recession, maybe a depression.

Hope somebody is scrutinizing the stocks of Republicans in Congress right now.

[Eliot Rosewater]

8. Of course it is. The GOP is a terrorist organization and they can crash the market

and get no blame for it so why not.

[PoliticAverse]

11. "Has the debt ceiling ever not been raised?" - There was a brief debt default in 1979...

when Congress couldn't get its act together...

See:
When Did The U.S. Last Default On Treasury Bonds?
https://www.npr.org/2011/07/11/137773341/looking-at-when-the-u-s-last-defaulted-on-treasury-bonds )

[Eliot Rosewater]

19. Article doesnt say what happened to the market when this happened.

This is so fucking ridiculous, like we dont have enough to worry about with everything else we have the GOP attacking our money.

[krawhitham]

14. The GQP knows we will use reconciliation to get it done at the last moment. They know we will fold..

But what they might not realize is since we only have ONE more reconciliation bill left that we can use, that it will be merged into the 3.5t "build back better" bill. Which will force Manchin & Sinema to either vote for the bill or to default our debt

[Eliot Rosewater]

18. And if they are being controlled by Koch and the like, they might do exactly that.

For the sole purpose of destroying Biden while accepting short term losses?

What I thought I read was Sinema cant win reelection, wont run but will go back to lobbying. This makes her a perfect tool for Koch and the like...worries the shit out of me.

[multigraincracker]

15. It'll be a good time to buy.

Can’t miss if you buy low and sell high.

[A HERETIC I AM]

16. Keep an eye on the 10 Year Treasury yield.

Last edited Thu Sep 30, 2021, 12:44 AM - Edit history (1)

It's risen about 20 Basis Points over the last week, but it is merely climbing back to where it was in June (~1.50 % )

https://finance.yahoo.com/quote/%5ETNX?p=%5ETNX


A serious spike in yield (a percent or more in a days trading) could indicate a serious selloff, and THAT would be bad news. If confidence in the integrity of Treasury Bonds begins to wane, holders will look to unload them, forcing prices down and yields up.

However, it is important to remember just how low yields are right now. That ten year paper is paying a coupon rate of 1.25% and is currently bid at a discount to par.

A true default would mean either interest payments are not made, or maturing securities are not redeemed on time or in full - or at all (ed. Or both) .

The worst case scenario would be failed auctions. The New York Branch of the Federal Reserve conducts the bond auctions for the Treasury, and if a given series (or several offerings, for that matter) of any paper are seriously undersubscribed, it means the pool of buyers is drying up, and they wont come back till yields go up enough to satisfy perceived risk. If interest payments are not made or a series is not redeemed on time, it is anyone's guess what the rate would be that would bring buyers back.

Keep in mind that during the Reagan years, the yield on the 30 year topped 12% ! Right now that bond is at 2.07% with a 2% coupon.

For perspective, 2% on a million dollars face value of these securities equals $20,000 a year in interest payments to the holder. It's peanuts.

[Eliot Rosewater]

17. Thanks, I wish I understood this. Do me a favor, tell me WHERE to look and exactly what

to look for please as if I was clueless about all this stuff, and I will keep a close eye on it, thanks!

For instance it is 15.7 now, right?

https://www.google.com/search?q=10+year+treasury+yield&rlz=1C1CHBF_enUS925US925&oq=10+year+tr&aqs=chrome.1.0i131i433i512l5j69i57j0i131i433i512j69i61.4865j0j7&sourceid=chrome&ie=UTF-8

and I am looking for it to do what? What direction is good?

And it says this


15.17
+1.57 (11.54%)past 5 days


that is 1.57, so is that bad? Is that a 1.57 spike in 5 days?

[A HERETIC I AM]

20. Any quote platform or website will have that quote.

Last edited Thu Sep 30, 2021, 11:20 AM - Edit history (1)

The bellweather "Risk Free Security" worldwide is the 10 year US Treasury Note, so that's why I brought it up. The reason it is considered to be so reliable (As it was explained to me by an economist who worked on the "Bond Desk" for AG Edwards, the same brokerage I did) is because it is a bond of substantial duration, that reliably pays periodic interest payments and so far, has NEVER failed to be redeemed at par, in full on the date of maturity. The secondary market for these securities is very deep and well regulated, and unlike most stocks and bonds of other types that settle "Trade plus 3", US Treasury Bonds settle "Same Day". As a result, Treasuries are a VERY liquid security and the purchase or sale of almost any amount of any series is typically accomplished by any bond trading desk at any bank or brokerage on the planet, in seconds. It also means these bonds (and the rest of the Treasury portfolio, for that matter) are in high demand as an interest bearing place to put money that is VERY safe.

Any government or central bank can issue sovereign bonds, but the Ten Year is denominated in US Dollars (as are all US Treasury securities, for that matter), which also happens to be the worldwide reserve currency. It must be purchased with dollars, the interest payments are made in dollars and it is redeemed when mature in US Dollars, REGARDLESS of who is the holder. The US Treasury does not send the Chinese Central Bank (Or whoever holds all their US Treasury Bonds) interest checks or wire transfers in Yuan. It's paid in dollars. It's up to the Chinese (or whoever) to convert those funds back to their own currency on the open market.

My best answer to your primary question is this;

What to watch is the Yield on the note and look for a spike. The price or cost of a bond rises or falls inverse to the yield. Yield up, the price falls, and vice versa. If there are more sellers than there are buyers, as with any open market, the price of the bonds fall and their yield rises. But the spike in yield is going to accompany some very bad news, so little, day to day jumps up or down are normal. There are various web sources for the daily trading results of these bonds, but Yahoo or Bloomberg are as good as any.

For instance it is 15.7 now, right?

No, it's one point five seven -> 1.57 %

and I am looking for it to do what? What direction is good?

You're looking for the yield to spike suddenly on SIGNIFICANT bad/stupid news (likely containing the words "Mitch McConnell" ) and then steadily but dramatically rising over the next few trading sessions. If they raise the debt limit (which I frankly think they will absolutely do, even if it is at the 11th hour) then things will plow along just as they are.

And it says this 15.17 +1.57 (11.54%) past 5 days. that is 1.57, so is that bad? Is that a 1.57 spike in 5 days?

Not sure what you were reading that says 15.17 (fifteen point one seven) (Edit here for further clarification; The 15.17 figure is an Index quote from the "CBOE". It's an index as opposed to a direct quote of bid/ask prices on the latest trade. It does reflect yield, however, Just move the decimal point one spot to the left! My apologies for not being clearer on this point.) but the yield quote would be 1.57%. Is it bad? Well, that depends on who you are. If you are the holder, then it is really very low by historical standards and you are getting peanuts for interest. If you are the US Treasury, and by extension, a US Citizen, then it is good because it means we can borrow money for ten years for...again...peanuts. No, it isn't inherently bad, not by any stretch, but it is exceedingly low from a historical perspective. The 11.54% is how much it went up over the last 5 trading sessions. The yield rose eleven and one half percent in 5 days time, from around 1.36% last Monday to the 1.57% you are seeing in the quote. Not much really, and when this number is looked at over a larger time span, it is a tiny blip on a large screen.

Look at this quote page from Yahoo
At the top right of the little chart is a link for "Fullscreen" Click that and when the large chart opens, hit "Max" at the top, to the right of "Date Range". This will give you a better perspective of where the trend is, and it has been downward for quite some time. Click the Plus or Minus symbols (+ or - ) at the bottom of the chart to increase or decrease the number of years the chart will show. I mentioned in my post above a one percentage point rise would be alarming. That means the yield would go from 1.57% to 2.57% in one day, in an environment where we are barely seeing movements of two tenths of a percent on a daily basis. It would be alarming, but it wouldn't mean a panic, just yet. Five or more straight days of that? Yeah, that would be serious, but you would be well aware of why it was happening by day 2.

Allow me to give a quick explanation about yield;

Yield is a function of price vs redemption value and/or the value of a coupon rate. There is an "and/or" there because the US Treasury sells bonds that do not make interest payments. You can see those here. Note that under the column "Coupon" the 3, 6 and 12 month paper has "0.00" in that column. These are called understandably enough, "Zero Coupon Bonds". They do not pay interest payments on an annual basis. That's because these instruments have very short maturities and the money you make (the Yield) is the difference between what you pay for it and what it matures at, called "Par". The Par value of almost every bond issued in the United States, be it US, State, Municipal or corporate, is $1,000.00 Notice the coupon next to the remaining securities, with the 10 yr being 1.25.

These 10 Yrs we are looking at, according to the Bloomberg page, have that Coupon rate of 1.25%. That means for every $1000 face value bond you hold, the Treasury is going to send you $12.50 a year, divided into 2 payments, 6 months apart. If the bond is currently selling on the secondary market for a grand, the yield is the same as the coupon. But if the bid price is HIGHER than a thousand dollars (called a "Premium" ) , the yield will be lower because you are still getting the interest payments, but when it matures, you will get back less than you paid for it. If you buy the bond BELOW par (a "discount" ), the opposite is true, and therefore the yield is higher.

ALL BONDS MATURE AT PAR - Unless another provision comes in to play, like a specific "Call Provision"

US Treasuries are RARELY called in early.

Again, there will be some VERY BAD NEWS that will precipitate any selloff, but bond traders worldwide are likely to know about it and be reacting to it long before the regular media is able to even put it out. And I'm not talking about any kind of insider trading or anything, it's just that information from the financial wire services traders worldwide are glued to is not something MSNBC or CNN is generally leading every news block with.

I hope that helps a bit. I'm sure I missed something and I'll probably make 20 edits (!) fixing a word here and there, but after having been at this for a couple hours now, I think I should just shut up!

[Eliot Rosewater]

21. THANK YOU SO MUCH!

I responded in PM also...

[bucolic_frolic]

22. It's all noise until somebody calls in their Treasury bonds and doesn't get paid

That would plunge the value of the US dollar. But the politicians will posture to score political points until the last minute, then compromise and pass it. If they didn't they would be *to blame* and we can't have any of that.

I don't worry about it too much, though emerging market bonds have tumbled this week. I watch the thinking man's side of Youtube, no gold/crypto/Schiff/and the like type hype, and opinions are all over the place. Up to 2 weeks ago I was hearing a 5% correction then the annual fall tech rally, but there is also a school of thought on deflation very soon. One did think a 50% haircut will happen soon, and these are not the crazy hype advisors. But I don't worry. I lightened up, I'm hedged, the biggest problem is China equities and you know it's still a great growth story 6-12 months out.

[Eliot Rosewater]

23. Thanks