Obama Bonds Proved World Beaters in Game of Chicken on Debt

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http://www.bloomberg.com/news/2011-08-02/obama-bonds-proved-world-beaters-as-congress-played-chicken-with-u-s-debt.html

For all the anxiety among politicians and their constituents over playing chicken with the debt ceiling and the prospect of the first-ever downgrade of U.S. debt, the people with the most at stake made more money buying Treasury securities in July than any month this year. Actually, they made a fortune, or $183,000 for every $10 million invested.

While commentators bemoaned America’s lost respect around the world, investors from Argentina to New Zealand snapped up Uncle Sam’s bonds in the $9.34 trillion market, driving yields on 10-year notes -- a benchmark for everything from mortgage rates to corporate debt -- to the lowest levels since November. U.S. government debt returned 1.83 percent in July, about three times more than the rest of the global sovereign bond market, Bank of America Merrill Lynch index data show.

“The bond market saw through the debate and saw that it would have to be resolved,” said Mark MacQueen, a partner and money manager at Austin, Texas-based Sage Advisory Services, which oversees $9.5 billion. “The market expected a resolution, which is less spending, hitting future growth, which is not good for stocks but is good for bonds.”

The Senate voted yesterday to raise the nation’s debt ceiling, currently $14.3 trillion, for the 79th time since 1960, before missing a payment. As a bonus to bond investors, the government will reduce spending by $2.4 trillion or more.