Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Minyan Mailbag - Long Bonds

By

PrintPRINT

Note: Our goal in Minyanville is to remove intimidation from the financial markets and encourage an interactive dialogue among the Minyanship. We share this next discussion with that very intent.

Professor Succo,

I have trouble understanding how our ever-increasing trade deficit, and federal deficits, results in progressively lower yields on long bonds. It seems that as a nation that we would need to borrow more funds (and lend at higher rates). I obviously am missing something.

Best,
Minyan Ron

Ron,

As stats worsen, it puts pressure on the dollar. Normally foreign
lenders would demand higher rates for their currency losses. It is clear
that the Japanese are not responding (currently) in this fashion. They
respond by buying more of our debt to recycle dollar liquidity in a
desperate attempt to support their "investments" and keep their own
currency weak. It allows the cycle of Japanese financing of U.S.
consumption and Chinese production to continue.

We have no idea when or if the Japanese will respond at some point in a rational way to the ever increasing public and consumer debt in the U.S. that this creates. Brian has commented continuously on the effects of the process on credit spreads and thus equities where I have commented on the resulting effects to our financial infrastructure and risk.

We are both left guessing as to when these effects "snap" back as markets more correctly assess the risks.

Regards,
Prof. Succo

No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

PrintPRINT
 
Featured Videos

WHAT'S POPULAR IN THE VILLE