Treasuries are safe as long as people keep buying them. We learned that during the recent government shut down. We were told the government would default on Treasuries if the debt ceiling was not raised, thereby allowing more Treasuries to be sold. ( We used to have a name for a system like that. )
I don't have all the numbers in front of me, but the time gaps between the 3 rounds of QE weren't long enough to draw any conclusions.
Unfortunately no. Our wonderful Federal government is insolvent. They cannot draw enough taxes from our economy to sustain their spending. That's because our economy is not creating enough wealth with 40% of our factories shipped off to the 3rd world.
So our government survives by selling Treasury bonds. With the FR buying less bonds, demand will drop, lowering prices. This will force the government to sell more bonds, increasing supply, further lowering prices. Lower prices mean higher yields. There's no way around it.
It might not be a question of right or wrong, just simple tax covering. The people who sold short made a profit in 2013, but if they covered before today, they would have to pay taxes this April. By waiting until the new year, they can forstall taxes until next April.
Regardless, it's still a short squeeze, just not the kind we usually think about.
I remember during the government shut-down, we were told that if the debt ceiling wasn't raised, the government would have to default on treasury bonds.
So basically, the Treasury needed to sell more bonds to pay off current investors. What do we usually call an arrrangement like that?
I am actually an agnostic. Anyway, I went to my sister's house and shared in Christmas dinner. Then I exchanged gifts with the family. I bought my neice a hair dryer from Target with a credit card.
I prefer to think in terms of Treasury bond prices, as that is what controls interest rates. With the FR buying less bonds, the demand will drop, and so will the prices. This will raise interest rates. The problem is we don't know exactly when this will happen. I suspect bond prices will slowly drop over the coming year.
For you option traders, this would be a good vertical spread play. Buy the 105 puts and sell the 104 puts. If TLT stays flat or goes down, the trade makes money.