Monday, August 8, 2011

Treasury Note Yields At New Lows

It seemed to us in July, that Treasuries would continue to be a safe haven for investors after any downgrade, and today's news confirms this. The Wall Street Journal writes that the two year Note's yield of 0.232% is a record low and below the top end of the Fed's policy band for the rate. The financial press seems to forget that safety and liquidity are very closely intertwined. Perhaps a Swiss government bond somewhere may be perceived as "safer," but Treasuries are the broadest, deepest and most liquid market for FI obligations, and that's important for nervous investors.

S&P, we can all agree, has imprudently overplayed their marketing hand and revealed, through their $2 trillion arithmetic error, that they don't deserve to be taken seriously on the U.S credit rating downgrade.

It was discouraging to read that the Justice Department has concluded its investigation into actions taken by Countrywide Financial and its officers during the run up to the financial crisis. Nobody has gone to jail yet, and it sounds as if that will continue to be the case. The Fairholme Fund's self-interested conference call with Bank of America management might be interesting, although it seems quite bizarre that the BofA management has agreed to this unique format for a 1% shareholder. It's a funny way to do business, in our opinion.

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