Markets Buy Up Treasuries in Lead Up to FOMC Meeting

FOR IMMEDIATE RELEASE
(Free-Press-Release.com) August 10, 2011 -- The global demand for stocks and commodities after Standard & Poors made the unprecedented move of lowering the US’s AAA credit rating drove the value of the global securities market up to a record high.

The market value of the Broad Market Index as calculated by Merrill Lynch grew from $132.4 billion at the end of July to $42.1 trillion, the highest value since 1996. The Index, which contains over 19,000 types of bonds from various governments, banks, and large companies from all over the world, won back 1.09% this month after equities markets went down sharply yesterday by $2.5 trillion, thereby increasing overall losses to $7.8 trillion since July 26. Even though the S&P announced that it was lowering the US’s credit rating to AA+ on August 5, DT Trading analysts have observed that this has only served as a red cape, further provoking those bullish on treasuries.

Yields on 10-year bonds fell 2.27% today, their lowest since January 2009. Investors are looking for safe stocks amid growing fears over the debt crises in the US and Europe and stalled growth in the manufacturing sector of two of the world’s largest economies may lead to a new recession.

“S&P’s downgrade of the US credit rating shocked the markets, especially equity markets, where we saw an absolute bloodbath,” said Jerrod Kerr, director of Australia and New Zealand rates at Credit Suisse Group AG in Singapore. “The lowered rating had the opposite effect on treasuries, where we’ve seen a hell of a rally,” the expert summarized.

Today will bring the much-anticipated Federal Open Market Committee’s decision on US interest rates. DT Trading analysts are of the opinion that it would be almost irresponsible for the committee to not also discuss the possibility of the Fed starting a new quantitative easing program since the US really doesn’t have many other options for reanimating economic growth. The discussion between a small circle of Washington lobbyists and the Obama adminstration over a program of tax breaks for big business did not win support from the White House. However, there is still one possible alternative left: to raise interest rates again and start printing money to fill Wall Street banks with liquidity. The European Central Bank has already announced that there will be a buy up of bonds from problematic countries, as was already pre-set in 2009 and which ECB Chairman Jean-Claude Trichet had, until recently, firmly resisted. Now, it’s the Fed’s turn – DT Trading analysts will be awaiting Ben Bernanke’s next move.

DT Trading Analytical Department

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