Top 10 at 10: GM bankruptcy looms; Oil hits US$64/bbl; US bond yields jump

Here's my Top 10 links from the last day or so at 10 am. I welcome your suggestions in the comments below. I'll be hoping to achieve escape velocity from the budget lockup at 2pm. 1. US Treasury bond yields spiked overnight on market fears about heavy US government bond issuance to fund massive deficits, FT Alphaville notes.

That sound you hear is not the roar of competing Manchester United and Barcelona supporters; rather, it is the sound of current bloodbath in Treasuries. The 10-year hit 3.709 per cent - a level not seen since November 2008 - while the benchmark yield curve steepened to a record 275bp compared with 263bp on Tuesday.

This is the real story today. Our budget will deliver news of big deficits and plans for over NZ$40 billion of borrowing over the next four years, but it is the rise in long term yields globally that will eventually be passed on to borrowers and savers. Barack Obama has a lot to answer for. These higher long term interest rates will increase mortgage rates in the United States, potentially delaying any recovery. 2. General Motors' bankruptcy is now considered inevitable after bondholders rejected a proposed debt for equity swap, Bloomberg reports. 3. Not only is the US government subsidising exports, it's also giving credit to the buyers of American food exports, particularly from the biggest American agri-businesses, Bloomberg reports.

Cargill Inc., Archer Daniels Midland Co. and Bunge Ltd. are benefiting from the most government support for farm exports since 1992 as the U.S. steps up loan guarantees for foreign buyers unable to get credit. About $4.35 billion was allocated to countries from Jamaica to Turkey through April 6 in the year that started Oct. 1 under the Export Credit Guarantee Program to underwrite loans that foreign banks grant for the purchase of corn, wheat and other U.S. farm products, government records show. That's 40 percent more than in all of fiscal 2008 and almost triple 2007's total. The U.S. is supporting exports after the Department of Agriculture predicted farm shipments will drop 17 percent in the current fiscal year because of falling commodity prices. Profit declined 68 percent at Cargill and 98 percent at ADM in the most recent quarter, as the recession curbed demand for everything from fertilizer to livestock feed. Bunge reported its second straight loss last month.

4. Brian Fallow at the NZHerald has a nicely nuanced piece on the electricity market's failure. He suggests a few solutions, including forcing the generators to deal with their own retailing divisions at arms length. Brian's piece is much better than yesterday's editorial in the same paper, which simply says we should allow the power companies to keep generating super profits. 5. Here's the counter argument to the FT's piece from a few days ago that China was stuck in a "dollar trap" and was still funding America's deficits. Jeff Nielson at Seeking Alpha says there was a US$211.4 billion outflow of capital from the United States in the first three months of 2009.

About the only useful piece of information in the Financial Times' propaganda was to note that China was only purchasing short-term Treasuries. This is highly significant for two reasons. First, the shorter-term Treasuries are the most-liquid form of U.S. debt. It's no surprise that China is choosing only these types of Treasuries, since it is currently on a commodities buying-spree "“ which it is financing with U.S. Treasuries. In other words, while China may be a net buyer of U.S. Treasuries in relation to its transactions with the U.S., on a global basis, China is spending its U.S. dollar holdings at least as fast as it is accumulating them. Does this look like China is "trapped"? The second important point about China's focus on short-term Treasuries is that this does very little to help the U.S. fund its gigantic, out-of-control deficits. The focus by China (and most other foreign buyers) on short-term Treasuries means that not only is the U.S. being forced to dump the largest glut of new Treasuries in history on this already-saturated market, but it is also being forced to try to "roll-over" additional, huge amounts each month as the short-term Treasuries mature.

6. US house prices have fallen 32% from the peak, data from Case Shiller shows. Rolfe Winkler at Option ARMageddon has the details. 7. WSJ.com reports that banks are "aiming to play both sides of the coin" by lobbying for public money to help them participate in the PPIP toxic debt clearance plan. 8. The UN has revised down its global economic forecasts sharply. It now sees a 2.6% contraction this year and unemployment rising to 50 million, Reuters reports. 9. Oil prices rose to a near 6 month high of US$64 a barrel overnight after Saudi Arabia said the global economy had strengthened enough to cope with an oil price at US$75-80 a barrel, Reuters reports. 10. The Dow fell 2% on the rise in US Treasury Yields and the fears about a GM Bankruptcy, the WSJ reports.