Iran tensions threaten Treasuries as safe haven

[TexasLawyer]

If the US has trouble selling Treasuries (also known as getting loaned money) we will be in a world of hurt. Multi-page article with many interesting factoids, such as the fact that OPEC countries held (a likely understated) $84.9 billion of Treasury securities in February, up from $53.9 billion six months earlier, according to the Treasury Department.


Iran tensions threaten Treasuries as safe haven
Fri Apr 21, 2006 9:40am ET


NEW YORK (Reuters) - Rising international tensions over Iran's nuclear program could undermine the traditional status of U.S. government bonds as a safe-haven asset but in the longer term, a crisis could benefit Treasury prices.

In times of high-stakes diplomatic poker or military confrontations, Treasury debt usually captures a strong bid as investors look for places to shelter their money. Treasuries fit the bill because they are so liquid and denominated in dollars, the world's premier reserve currency.

But the Iran nuclear crisis, if it escalates, could give many investors pause because of the heavy investments of Middle Eastern central banks in U.S. government debt. A conflict with Iran could trigger a shift in those investment patterns. If central banks buy fewer Treasuries or stop buying them altogether, prices would tumble, something a safe-haven investor would hope to avoid at all costs.


<snip>

The United States, as the world's biggest crude oil importer, is particularly vulnerable to rising crude prices filtering into the cost of gasoline and other products directly borne by consumers. Inflation erodes the value of fixed-income assets over time. Long-dated Treasuries, such as the 10-year note and 30-year bond, are particularly vulnerable to inflationary pressures.


Continued...

http://today.reuters.com/news/articlenews.aspx?type=reutersEdge&storyid=2006-04-21T144741Z_01_N21264028_RTRUKOC_0_US-MARKETS-BONDS-IRAN.xml

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[cliss]

1. We're caught!

At this point, we really don't have many options. (The ones we had were tapped out long ago).

If foreign countries cut back on their buying (even a little bit) the Fed will be forced to raise interest rates.

A rise in interest rates will be catastrophic. The stock market will go down as a result. The real estate market will do a 'titanic'. This economy is hanging on by a thread, as it is. Think of that kitten, hanging on to a knot at the end of the rope.....that's Washington.

Their only hope at this point is to start the printing presses.....the money printing presses, that is. Run 'em day and night. It's the only "easy" solution right now.

[TexasLawyer]

3. I think interest rates are going to go

way up. Especially if the printing presses start whirring, the value of the dollar will further erode and Treasury rates will have to be pretty attractive to entice investors into the house of cards that will be the American economy.

Some Paul Krugman articles convinced me two years ago to lock in a fixed rate mortgage and get rid of my ARM. I recommend battoning down the hatches.

[Ian David]

2. What if we were to seize all Iranian assets in American banks? n/t

[Toots]

4. We did that once and I am sure they remember it well.

I think a few other mideast countries are starting to remember it as well. 90 billion dollars is not much really when you consider our deficit this year alone is over four hundred billion without counting "war" costs..and we are adding to our debt over a hundred thousand dollars a second... :crazy:

[Ian David]

5. Well, we could close our Halliburton office in Tehran? n/t