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US Treasury Bond prices rise on weaker economic data


Treasurys prices rise on weaker economic data
May 26, 2011, 4:21 p.m. EDT
Associated Press

Journal By Calvin Lee Ledsome Sr.,

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NEW YORK (AP) — Investors sent government bond prices higher Thursday after reports on unemployment claims and first-quarter economic growth reinforced expectations that the economic recovery may be moderating.

The price of the 10-year Treasury note rose 62.5 cents per $100 invested in late trading. Its yield, which moves in the opposite direction to the price, fell to 3.06 percent from 3.13 percent late Wednesday.

It was the lowest level for the 10-year yield in a year. The yield is used as benchmark on a wide variety of loans for businesses and consumers including home mortgages.

The government reported that more people applied for unemployment benefits last week, the first increase in three weeks. Analysts had expected a drop.

The government also said that the U.S. economy grew at a relatively sluggish rate of 1.8 percent in the January-March quarter, due partly to a spike in gas prices above $4 a gallon. Economists had forecast an upward revision to 2.2 percent.

Traders tend to buy Treasurys when economic growth appears to be losing momentum.

The Treasury Department also auctioned off $29 billion in seven-year notes at a yield of 2.43 percent, the lowest yield of the year. Investors placed bids for 3.24 times the amount offered, higher than the previous four auctions this year.

The yield of the seven-year note was 2.36 percent late Thursday.

In other trading, the price of the 30-year bond rose $1.03 per $100 invested, while its yield fell to 4.22 percent from 4.27 percent late Wednesday. The yield on the two-year note slipped to 0.50 percent from 0.54 percent.

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China is using high-level meetings to urge the United States to allow more technology exports


China urges US to lift controls on hi-tech exports
May 10, 2011, 6:49 a.m. EDT
Associated Press

Journal By Calvin Lee Ledsome Sr.,

Owner and Founder of: http://www.LedSomeBioMetrics.com

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WASHINGTON (AP) — China is using high-level meetings to urge the United States to allow more technology exports into the booming Chinese economy as a way of balancing trade.

The United States, meanwhile, has criticized the communist-led nation’s latest crackdown on democracy advocates, arguing that long-term stability depends on respecting human rights.

Both sides issued familiar grievances at the U.S.-China Strategic and Economic Dialogue, which began in Washington on Monday, but they took pains to stress a generally positive track in relations between the two economic superpowers.

State Councilor Dai Bingguo said common interests between the world’s two largest economies now make them “inseparable” and destined to grow more interdependent.

The annual two-day round of talks brings together leaders on economics, foreign policy and security. The meetings, involving scores of officials, wrap up Tuesday with news conferences.

President Barack Obama met Dai and Chinese delegation leader Vice Premier Wang Qishan after Monday’s deliberations. He encouraged China to implement policies to support “balanced global growth as well as a more balanced bilateral economic relationship.” On human rights, he underscored his support for freedom of expression and political participation, a White House statement said.

This year’s dialogue follows a January state visit by Chinese President Hu Jintao that helped eased tensions over the U.S. arms sales to self-governing Taiwan, which Beijing regards as part of Chinese territory. The U.S. and China also have been at odds over China’s intervention in currency markets, which the U.S. says has kept the value of the yuan low against the dollar, giving an unfair advantage to Chinese exporters.

Treasury Secretary Timothy Geithner on Monday softened the long-standing U.S. criticism of China’s economic policies, possibly in a belief that the outside pressure was proving counterproductive.

Geithner praised China’s efforts, which include a decision last June to resume allowing the yuan to rise in value against the dollar after freezing the currency’s value for two years during the height of the financial crisis. The yuan has risen by about 5 percent against the dollar since last summer. American manufacturers contend the yuan is still undervalued by as much as 40 percent.

The U.S. Treasury chief still urged China to allow its currency to appreciate at a faster rate and to allow Chinese consumer interest rates to rise. Both steps could help boost domestic demand and help lower America’s trade deficit, which hit an all-time high with China last year.

A Chinese official, however, blamed U.S. policies for the ballooning trade gap. Commerce Minister Chen Deming told a news conference that China’s currency appreciation was being carried out in a “very healthy manner.” He said the United States needed to change its own policies on high-tech sales and investment as a way to spur American manufacturing.

He took aim at the U.S. screening of Chinese foreign investment proposals, contending it was neither fair nor transparent. Most recently, the Committee on Foreign Investment in the United States rejected a takeover by private Chinese technology giant Huawei of a small U.S. computer company, 3Leaf, on national security grounds.

“We hope the United States can treat Chinese investment, including by state-owned enterprises, in a fair manner,” he said.

U.S. companies have their own long list of complaints: limited access to Chinese markets, theft of intellectual property, widespread use in China of counterfeit software and problems in seeking redress through China’s legal system.

At the ceremonial opening of the talks on Monday, Vice President Joe Biden and Secretary of State Hillary Rodham Clinton offered blunt criticism of China’s human rights record, which Beijing regards as an internal matter. Clinton later had “very candid and honest” private discussions on the issue with Dai, U.S. officials said.

Since February, Chinese authorities have questioned or detained hundreds of lawyers, activists, journalists and bloggers after anonymous calls were made on the Internet for protests emulating those that have challenged and toppled authoritarian governments in the Middle East and North Africa. No such protests have taken place in China.

“We know over the long arc of history that societies that work toward respecting human rights are going to be more prosperous, stable and successful. That has certainly been proven time and time again, but most particularly in the last months,” Clinton said.

Dai said China had made progress in the area of human rights, but he did not mention the recent crackdown.

In Beijing on Tuesday, Chinese Foreign Ministry spokeswoman Jiang Yu said, “No country is perfect in its human rights record and there is no one-size-fits-all human rights policy.”

In unusually mild comments on a subject that Beijing is highly sensitive about, Jiang said, “China and the U.S. have different opinions in the area of human rights and we believe we can use dialogue to increase mutual understanding and mutual trust.”

This year’s talks for the first time included high-level military leaders from both nations, a move seen as a way to increase understanding between military commanders and reduce the risk of conflict. China’s military has expanded rapidly in the past 15 years, deploying missiles and naval assets that could challenge American supremacy in the region.

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United States government risk losing the nation’s sterling credit rating.


S&P warning: Fix deficit or risk credit rating

Posted by Calvin Lee Ledsome Sr.,

Owner and Founder of: http://www.LedSomeBioMetrics.com

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WASHINGTON (AP) — A key credit agency issued an unprecedented warning to the United States government Monday, urging Washington to get a grip on its finances or risk losing the nation’s sterling credit rating.

For the first time, Standard & Poor’s lowered its long-term outlook for the federal government’s fiscal health from “stable” to “negative,” and warned of serious consequences if lawmakers fail to reach a deal to control the massive federal deficit.

An impasse could prompt the agency to strip the government of its top investment rating in the next two years, S&P said. A loss of the triple-A rating would ripple through the American economy, making loans more expensive and credit more difficult to obtain.

The downgrade was interpreted as a rebuke to President Barack Obama and congressional Republicans, admonishing them to put politics aside and come up with a long-term financial plan as soon as possible.

“This is a warning: Don’t mess around,” said Robert Bixby, executive director of the Concord Coalition, a nonpartisan group that is pushing for deficit reduction.

Analysts at S&P have never before used the outlook to cast doubt on the nation’s credit worthiness.

In response, stocks suffered their worst slide in a month. The Dow Jones industrial average plunged 245 points before recovering to close down 140 points for the day.

“The credit quality of U.S. debt is sacrosanct, and legislators will do everything within their power to avoid a downgrade,” said Jack Ablin, chief investment officer at Harris Private Bank.

The government is on pace to run a record $1.5 trillion deficit this year, the third consecutive deficit exceeding $1 trillion.

But so far, S&P sees little chance that the White House and Congress will agree on a deficit-reduction plan before the November 2012 elections, and the rating agency doubts that any plan would be in place until 2014 or later.

Obama and congressional Republicans are sparring over how to reduce the nation’s red ink. If Congress refuses to raise the nation’s debt limit this spring, and the U.S. Treasury lost authority to borrow additional money, the government would not be able to pay its bills and would default on its debt.

Although it’s a worst-case scenario that’s highly unlikely, default by the government means anyone owning federal debt of any kind — bills, notes, bonds — could go unpaid.

Both sides have proposed cutting $4 trillion from future deficits over the next 10 to 12 years.

The White House wants to reduce the deficit through spending cuts and by ending the Bush-era tax cuts for the wealthy. Republicans reject that, calling it a tax increase. They seek instead to narrow the deficit largely by overhauling Medicare and cutting spending elsewhere.

The credit report called the two proposals a “starting point” of the process, but warned that the gap between the parties remained wide.

S&P took no position about how to reduce the deficit or how to change spending and revenue plans.

“But for any plan to be credible, we believe that it would need to secure support from a cross-section of leaders in both parties,” S&P said in its report.

A lower credit rating would drive up the government’s borrowing costs. It could lead to higher interest rates on everything from mortgages to car loans and threaten to slow U.S. economic growth.

Ablin said the credit worthiness of the country is the underpinning on which all other asset classes are valued.

“If all of a sudden the credit quality of U.S. Treasurys isn’t as high as people perceive, we could see erosion of confidence,” he said.

For now, S&P continues to give the U.S. government its top investment ranking. That means S&P believes that the U.S. government can and will repay its debts and that Treasury investments are virtually risk-free. But the agency says the U.S. faces a one in three chance of a downgrade in the next two years. That would likely happen if the White House and Congress could not come up with a credible plan for reducing debt.

The other major credit agencies — Moody’s and Fitch Ratings — did not match S&P’s outlook warning.

S&P gives its top investment rating to just 19 of the 127 countries it analyzes. But it says Britain, France and Germany moved much faster to contain deficits after the 2008 financial crisis and 2007-2009 recession, which cut tax revenues and forced governments to spend more on unemployment benefits, aid to the poor and bailouts of the banking system. Those countries also have top-notch investment ratings.

S&P noted that the U.S. deficit grew to 11 percent of economic activity in 2009, a risky percentage. The deficit averaged less than half that percentage in the previous six years.

The government was beginning to run surpluses at the end of the Clinton administration. But deficits returned after President George W. Bush’s tax cuts, a 2001 recession, wars in Afghanistan and Iraq, and a massive expansion of Medicare’s drug coverage.

The deficit widened even more after the Great Recession started in 2007, depleting tax revenue and raising spending to stimulate the economy and provide benefits for the unemployed and the poor.

In the past, credit warnings have jolted politicians into action.

In May 2009, Standard & Poor’s downgraded its long-term outlook on the United Kingdom to negative, saying that the country’s debt could double in four years.

Prime Minister David Cameron and his Conservative-Liberal coalition government laid out plans to cut nearly 500,000 jobs and reduce welfare spending. Britain’s economy also posted modest gains, and the ratings agency changed its outlook in October back to “stable,” noting the government’s “political resolve.”

In recent months, at least two countries — Portugal and Greece — have had their credit ratings downgraded as they endured financial woes of their own.

The Obama administration embraced Monday’s warning as a welcome call for cooperation among the two political parties. Press secretary Jay Carney said the White House believes the political process will outperform the agency’s expectations because the president and Congress recognize the problem.

A budget showdown is likely in the next few weeks. Treasury Secretary Timothy Geithner has said the government will reach its debt limit no later than May 16. He can juggle funds to keep the government running until about July 8, after which the government could not pay its bills.

On Sunday, Geithner said Republican leaders have privately assured the Obama administration that Congress will raise the government’s borrowing limit in time to avoid an unprecedented default on the nation’s debt.

But Rep. Eric Cantor, the No. 2 Republican in the House, took a hard line Monday, calling the S&P announcement “a wake-up call to those in Washington asking Congress to blindly increase the debt limit.” He said Republicans would only agree to raise the debt ceiling if the White House agrees to “serious reforms that immediately reduce federal spending and to end the culture of debt in Washington.”

A bipartisan deficit-reduction commission appointed by Obama recommended late last year that about $4 trillion be slashed from budget deficits during the coming decade.

Under the commission’s plan, roughly two-thirds of the savings would come through spending cuts and one-third through increased tax revenue. Although overall tax rates would decline, dozens of popular tax breaks would be scaled back or eliminated, including the child tax credit, mortgage interest deductions and deductions claimed by employers who provide health insurance.

Obama praised the panel for its work, but embraced few of its recommendations, and none of the major ones on new taxes.

For now, U.S. politicians are at a stalemate. “There is bipartisan agreement on the need to reduce the debt by $4 trillion over roughly the next decade,” said Sen. Charles Schumer, D-N.Y. “Now we just need to resolve how to do it.”

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Associated Press writers Pallavi Gogoi and Janna Herron in New York and Derek Kravitz, Andrew Taylor, Jeannine Aversa and Ben Feller in Washington contributed to this report.

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Calvin Ledsome Sr.,

Owner and Founder of: 

Thank you for visiting, do come back for more news…
Warmest regards,

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