FNMA 4.5% bond quote: closed the session at $100.44 which is up 25 bps on the day.
Why? Many are still looking at the conditions in Greece and trying to pull their money out of there. With that, money is flowing into the bond market.
What happened in Greece? Here is a good article with a timeline if you are interested. http://patrick.net/forum/?p=28560 I always like to see the comments underneath this type of an article and take in the different perspectives. Bottom line: it was announced that they are "insolvent".
HIGHER tax receipts from 2009? I read some commentary on this today and found this article that supports it.
-- http://www.businessweek.com/news/2010-03-30/california-revenue-shows-state-cash-collapse-ending-update1-.html
-- http://www.businessweek.com/news/2010-03-30/california-revenue-shows-state-cash-collapse-ending-update1-.html
However, looking closer it doesn't really get too into the "why". Perspective: many of us have seen a remarkable upswing in our financial portfolio as many of our more conservative investments have increased in value over the last 13 months or so. Some of the stocks that I hold for instance have doubled in value and are now back close to the levels they were in 2007 and early 2008 before the real downswing in the market. Interestingly, after taking losses on personal tax returns due to failing investments: many are taking gains. Some due to investments cashed in when everyone was in panic mode at the beginning of 2009. As a result: people are paying MORE in taxes. Gross tax receipts are UP in part due to this.
Why do we care? Well, if the gov't is getting more money in the form of taxes paid: they have less need to "print" money in the form of T-notes to sell to the market. When they are selling less t-notes: the values stabilize and actually improve without the flood of supply. Remember the supply and demand theory? Less supply+less demand for safe money as markets stabilize keeps the yields lower.
The possible effect: some of the urgency to sell t-notes may be eased and inflation rates will remain more stable. Remember that due to all the "printing" of money and investment by the feds into the private sector there are worries of rampant inflation in the future.
Scary Quote from Article linked below: "The Fed and U.S. agencies have lent, spent or guaranteed $9.66 trillion to lift the economy from the worst recession since the Great Depression, according to data compiled by Bloomberg." http://www.businessweek.com/news/2010-02-04/taleb-says-every-human-should-short-u-s-treasuries-update1-.html
Enjoy the day,
Chad Schauers
