At first glance, word that the number of so-called primary government securities dealers decreased to 19 from 20 last month, may seem like a fairly esoteric concern that's removed from the typical investor and taxpayer.
But, in practice, it isn't that removed because fewer dealers means fewer firms bidding for U.S. bonds - - a circumstance likely to increase government (read: taxpayer) borrowing costs, Mark MacQueen, money manager of Sage Advisory Services told Bloomberg News Monday.
The number of authorized bond traders who make markets in U.S. Government debt decreased to 19 when the Bank of America (NYSE: BAC) acquired Countrywide Financial Corp., Bloomberg News reported. It will drop again, to 18, after J. P. Morgan Chase (NYSE: JPM) completes its takeover of Bear Stearns.
Economist David H. Wang agreed Monday that the bidder math is not running in the U.S. Government's favor at this juncture. "We know from basic economics that, historically, if the number of market makers declines, auctions will not be as efficient, and this will lead to higher financing costs for the U.S. Government," Wang said.
Another factor likely to drive up U.S. Government borrowing costs: the size of the U.S. Government's budget deficit, Wang said. The Congressional Budget Office projects that the Fiscal 2009 deficit will total $500 billion, up from $470 billion in Fiscal 2008, the current fiscal year, which ends September 30, 2008. (pdf)
But, in practice, it isn't that removed because fewer dealers means fewer firms bidding for U.S. bonds - - a circumstance likely to increase government (read: taxpayer) borrowing costs, Mark MacQueen, money manager of Sage Advisory Services told Bloomberg News Monday.
The number of authorized bond traders who make markets in U.S. Government debt decreased to 19 when the Bank of America (NYSE: BAC) acquired Countrywide Financial Corp., Bloomberg News reported. It will drop again, to 18, after J. P. Morgan Chase (NYSE: JPM) completes its takeover of Bear Stearns.
Economist David H. Wang agreed Monday that the bidder math is not running in the U.S. Government's favor at this juncture. "We know from basic economics that, historically, if the number of market makers declines, auctions will not be as efficient, and this will lead to higher financing costs for the U.S. Government," Wang said.
Another factor likely to drive up U.S. Government borrowing costs: the size of the U.S. Government's budget deficit, Wang said. The Congressional Budget Office projects that the Fiscal 2009 deficit will total $500 billion, up from $470 billion in Fiscal 2008, the current fiscal year, which ends September 30, 2008. (pdf)
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