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Fallout: The Financial Crisis

T-notes on sale to help fund bailout

Jeremy Hobson Sep 24, 2008
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Fallout: The Financial Crisis

T-notes on sale to help fund bailout

Jeremy Hobson Sep 24, 2008
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TEXT OF STORY

Scott Jagow: The Treasury Department will auction off some two-year notes today. Treasuries are considered a safe place to stash your money, usually. But with this $700 billion bailout ahead, are T-notes really gonna be a safe investment? Jeremy Hobson looks into that.


Jeremy Hobson: Investors rely on government bonds to generate a small profit without much risk. But today, it’s the government that’s relying on investors to finance its bailout plan, says Jim Bianco of Bianco Research.

Jim Bianco: They need to get $700 billion to fund this. They’re not raising taxes to do it. They’re going to borrow the money. And they’re going to borrow the money in the treasury market.

Bianco says foreign buyers may be more hesitant to buy treasuries now because of increasing worries about a drop in the value of the dollar. TJ Marta is a fixed-income strategist at RBC Capital Markets. He says investors are also worried about the government stumbling down the road.

TJ Marta: There’s a significantly greater default risk priced into U.S. treasuries than for any of the other G-7 countries so that’s one worry. The other worry is the prospect that the U.S. government is going to have to inflate its way out of this debt.

The Treasury Department will auction off another $24 billion in five-year notes tomorrow.

In New York, I’m Jeremy Hobson for Marketplace.

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