The Fed has no choice but to raise interest rates and crush the market

[volpunter]

thats not what I said, and my answer is it depends. My point was that bonds purchased above par can, depending on the coupon and other factors, cause a loss on invested capital even if held to maturity (I am not saying bonds trading below par cannot generate an investment loss even if held to maturity. I made the above-par point because that is the scenario which we are in). And the Fed is exposed to that and the likelihood is very high that the Fed will not be transferring money to the Treasury but instead will finish many quarters to come with a capital loss, and not an insignificant one in aggregate.

And by the way, the Fed would not hold to maturity (at least not in most cases) as they target specific maturity/durations in their portfolio in order to assist their mandate.

So you think if someone purchased 10yrTs today which is over par as you can see, they would take a loss if that someone held to maturity?

 

[volpunter]

so you judge before you even get anyone's response? Interesting...

Perhaps you should take a bonds 101 class.

 

[volpunter]

the neverending shelling with moussaka, courgette balls, and feta cheese. Ouch, that hurts more than a Greek default.

And an economics class, and an austerity class, and ....

 

[WeToddDid2]

so you judge before you even get anyone's response? Interesting...

uhhhhhhh.....yeah, you should definitely take that class.

thats not what I said, and my answer is it depends. My point was that bonds purchased above par can, depending on the coupon and other factors, cause a loss on invested capital. And the Fed is exposed to that and the likelihood is very high that the Fed will not be transferring money to the Treasury but instead will finish many quarters to come with a capital loss.

Do you understand what a MTM is?

Since you clearly think that you know what you are talking about, please answer the following test question.

What specific yield would a T have to be purchased at in order for someone to take a loss if held to maturity not taking into consideration transaction cost?

 

[volpunter]

fuck you, I am not your test boy. (btw, I gave you that answer already before you even asked if you look carefully).

You are evading the point I made. Are you agreeing that treasury securities, including the ones purchased above par and held to maturity, can generate a loss on capital invested? If yes then you should concede that the Fed is exposed to such risk. Most of the securities they hold are not even held till maturity.

If rates rise, they would take a loss. Even if they hold to maturity, they've essentially taken a paper loss (as they overpaid for the asset). Regardless, it's not that big of a deal for the Fed.

uhhhhhhh.....yeah, you should definitely take that class.


Do you understand what a MTM is?

Since you clearly think that you know what you are talking about, please answer the following test question.

What specific yield would a T have to be purchased at in order for someone to take a loss if held to maturity not taking into consideration transaction cost?

 

[WeToddDid2]

thats not what I said, and my answer is it depends. My point was that bonds purchased above par can, depending on the coupon and other factors, cause a loss on invested capital even if held to maturity (I am not saying bonds trading below par cannot generate an investment loss even if held to maturity. I made the above-par point because that is the scenario which we are in). And the Fed is exposed to that and the likelihood is very high that the Fed will not be transferring money to the Treasury but instead will finish many quarters to come with a capital loss, and not an insignificant one in aggregate.

And by the way, the Fed would not hold to maturity (at least not in most cases) as they target specific maturity/durations in their portfolio in order to assist their mandate.

So you think that the Fed would sell a T at a loss in order to have a target maturity/duration? Why do you think the Fed even cares about duration? They are not a household or investment bank.

The Fed is in the business of manipulating the market on a day to day basis to attempt to achieve it's stated target rate. This is what is does.

The Fed will absolutely hold to maturity if selling the bond in the open market would result in a loss. Why wouldn't they?

 

[WeToddDid2]

fuck you, I am not your test boy. (btw, I gave you that answer already before you even asked if you look carefully).

You are evading the point I made. Are you agreeing that treasury securities, including the ones purchased above par and held to maturity, can generate a loss on capital invested? If yes then you should concede that the Fed is exposed to such risk. Most of the securities they hold are not even held till maturity.

This guy is a special kind of stupid.

You did not give me the answer. It is a very easy question. You can't answer it?

Are you agreeing that treasury securities, including the ones purchased above par and held to maturity, can generate a loss on capital invested?

Please explain how.

 

[WeToddDid2]

The Fed is not like you. It is not like a state. It is not like Greece. It is not like a business. It is not like a household balance sheet.

 

[Ricter]

fuck you, I am not your test boy. (btw, I gave you that answer already before you even asked if you look carefully).

You are evading the point I made. Are you agreeing that treasury securities, including the ones purchased above par and held to maturity, can generate a loss on capital invested? If yes then you should concede that the Fed is exposed to such risk. Most of the securities they hold are not even held till maturity.

What does the Fed lose? It created money reserves to purchase those securities in the first place.

 

[volpunter]

Very simple. It loses its control over future inflation. If you have the slightest doubt about that then its maybe time to undust history books. Last time I checked that was one of Fed's primary mandates.

With that I wave a good night and good bye.

What does the Fed lose? It created money reserves to purchase those securities in the first place.