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Your comments are accurate, but issuing new bonds at high yields is by
design, not because of bad timing or because they're forced to.
If you look back at the '80s, yields were dropping in a normal cyclical
manner and the party in power wanted to give their people a place to park
their money at high yields for the next 30 years. Massive deficits were
created that had to be covered-- tax revenues were nowhere near enough to
meet demands and massive quantities of bonds were floated to cover the
deficits.
People who were able to afford them were guaranteed anywhere from 10% to
17% on their money for the next 30 years. Not a bad deal if you can get
it-- obviously most people can't. Those 10% to 17% yields are paid out
regularly to the fortunate few, partially by floating more bonds over the
next 30 years -- can anyone say "ponzi scheme"???
Don't try this at home kids :)
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At 08:38 AM 05/31/2000 -0500, you wrote:
>It is typical of the government that they start reducing long term debt
>with long term rates at generational lows. With yields in the 6% range they
>should be locking in long term financing. Instead what will happen, is that
>they will wait for yields to get back into double digits and then be forced
>to issue new thirty year treasuries at a much higher rate. AND THEN: When
>yields fall back into the 6% range again... start buying back. Thank you
>government.
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