So we hit the debt limit...

[Malthus]

Give it up for Berlusconi--for the first time in over 1500 years, he has the world terrified of what the Italian people might unleash on them.

You mean aside from "Bunga Bunga"? 

[MadImmortalMan]

Oh hell. Here we go again.

Sen. Jon Kyl (R-AZ) threatened to quit the Super Committee Thursday morning Bloomberg reports — hours after the deficit cutting group's first meeting — telling DC conference that he would leave the committee before accepting any cuts to defense spending.

Bloomberg is reporting Kyl said the committee can find the required $1.5 trillion in savings without further cuts to defense spending.

[The Minsky Moment]

Proposition 1: The US federal fiscal position is precarious, and the US risks default if it does not take immediate strong action to take deficits under control.
Proposition 2:  Markets are reasonably efficient in the semi-strong efficient sense of asset prices reflecting publicly available information in an unbiased way.

Fact: Yields on US federal government treasury securities are 0.20% for 2-year bonds, 0.91% for 5-year, and 2.04% for 10 years.  The fact is from the newspaper, reporting yesterdays rates.

Given that fact, at least one of Proposition 1 or 2 must be false.

I would be curious to ask the GOP Presidential candidates which one they think is wrong, but I suspect fewer than half of them would understand the question.

[NOTE: edited to fix slight errors in yields as reported in the OP, main impact was 2-yr is sightly higher, the longer maturities lower)]

[Admiral Yi]

Proposition 3: the US is running annual deficits that put it on the path to unsustainibility in the medium term.

This is consistent with proposition (fact) 2.

Unless you think the model of debt/GDP that determines risk premiums for every other country in the world somehow doesn't apply to the US.

[frunk]

Proposition 3: the US is running annual deficits that put it on the path to unsustainibility in the medium term.

This is consistent with proposition (fact) 2.

Unless you think the model of debt/GDP that determines risk premiums for every other country in the world somehow doesn't apply to the US.

Is medium term further than 10 years out?  Otherwise I would expect the 10 year yield to be going up.

[MadImmortalMan]

US debt is still the safest crap investment out there with Europe imploding. That's why the rates are low. We have to take our turn in the bankruptcy line, you see.

[Admiral Yi]

Is medium term further than 10 years out?  Otherwise I would expect the 10 year yield to be going up.

Medium term is maybe 3 to 5ish.

Take a look at the historical PIIGS yields before the shit hit the fan.

[The Minsky Moment]

Proposition 3: the US is running annual deficits that put it on the path to unsustainibility in the medium term.

That would imply a much higher yield on the 10 year if the market efficiency hypothesis holds.

Also the 30 year is at 3.35%.  By way of historical context, average inflation rates in the US over the past 75-100 years are in the vicinity of 3.5 percent.

[HisMajestyBOB]

Oh hell. Here we go again.

Sen. Jon Kyl (R-AZ) threatened to quit the Super Committee Thursday morning Bloomberg reports — hours after the deficit cutting group's first meeting — telling DC conference that he would leave the committee before accepting any cuts to defense spending.

Bloomberg is reporting Kyl said the committee can find the required $1.5 trillion in savings without further cuts to defense spending.

Of course. We can solve the debt problem by just cutting Planned Parenthood and PBS - once we are proper conservatives, God will shower us with money!

[MadImmortalMan]

The next treasury auction will breach the new debt ceiling.

[The Minsky Moment]

Another $500 billion kicks in this month unless there is a disapproval vote.

[Neil]

Well, if Jon Kyl is on the committee, I think it's pretty much doomed to failure.

[Admiral Yi]

Well, if Jon Kyl is on the committee, I think it's pretty much doomed to failure.

Take him off and the probability of agreement would skyrocket to zero.

[Razgovory]

Well, if Jon Kyl is on the committee, I think it's pretty much doomed to failure.

That was the idea.

[Neil]

Well, if Jon Kyl is on the committee, I think it's pretty much doomed to failure.

Take him off and the probability of agreement would skyrocket to zero.

Well, if the Republicans intend to torpedo an agreement, then what's the point?