Debt levels moving lower but at a snails pace

The Fed’s Q4 ’09 flow of funds statement (a balance sheet of the US, incl households, companies and gov’t) reveals an improvement in the aggregate debt levels on an absolute basis but at a snails pace. Household debt (home mortgages + consumer credit) as a % of disposable income fell to 115% from 117% in Q3, vs 121% in ’08, and vs the record high of 125% in ’07 and is back to the lowest level since 2004. However, it remains well above the level of 10 yrs ago at 91% and 83% back in 1995. Debt to GDP for our country as a whole fell to 348% from 355% in Q3. It was 308% back in ’05 and 231% back in ’94, right before the secular bull market began its last move higher. Households and companies did the rational thing and cut debt by a net $474b but this was partially offset by a $267b rise in local, state and fed’l gov’t increases, with the fed’l gov’t making up 90% of the increase. Household net worth rose by $682.7b as asset prices rebounded.


30 yr bond auction good and again w/ caveat

The 30 yr bond auction was good but again with a caveat. The positives being a yield that was a touch below the when issued and a bid to cover of 2.89 that is the best since Sept ’09 and well above the one year average of 2.43. The caveat is similar to what’s been seen where direct bidders have become a much greater portion of the process, thus clouding the historical pricing mechanisms. They totaled 29.6%, the most since the 30 yr was reintroduced in ’06 and well above the average since then of 5.8%. Indirect bidders totaled just 23.9% which is the lowest since Nov ’08. Either way, the demand was very good for those brave enough to go out 30 years in lending the US gov’t money with no inflation protection and its why the bond is now up on the day.

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