<Unless someone else has an explanation? >
Yes indeed, economic news has little to do with it, it's virtually all about the usual suspect "buyers" : foreign central banks, the Fed, the leveraged spec community, and the GSE's Fannie and Freddie.
First keep in mind that the twin deficits require about $20 billion in new debt be funded each week. Obviously, there isn't enough savings on the entire planet to do that in a legitimate market with real fundamentals. Plus the investment merits of buying US debt at these interest rates, and with the threat of USD devalution is about zip. So that means CBs themselves buy a shitload of it. In fact in the last eight weeks foreign CBs (primarily Japan) bought 35.56B in US debt. The Fed bought 4.085B. That's about a third of all the new debt.
Here's the tally, it's a WWF tag team bruhaha:
Date Foreign US Fed
10-29 +224 +1341
10-22 -2229 +209
10-15 -985 +174
10-08 +18,238 +123
10-01 +10,173 +129
9-24 -1,111 +223
9-17 +3,181 +1,242
9-10 +8,099 +644
Of course that still left about 80B in new debt over the eight weeks to deal with, so it's necessary to call on GSE's (you know Freddie and Fannie, the guys with the billion dollar "bookkeeping" problems),
biz.yahoo.com
who can borrow no questins asked from the Treasury and buy more of these Old Maid cards.
Sometimes (much more often lately) even that's not enough, and it becomes necessary to embolden the animal spirits of speculators and hedge funds, who can use leverage and more borrowing (the carry trade) and play the market if they feel they have a free rein (moral hazard) and the support of the CB's. The Fed can do that through their "policy statements". You know, say interest rates aren't going up for a "considerable time". And if that's not enough, the Fed can provide extra, nearly free funds (1%)at the repurchase window for their pals the big banks and brokers to dabble in bond rallies. That kind of looks bad though, when you supposedly have 7% GDP growth. A real thumb in the dam, juggling act I'd say, better than anything you'd find at Vegas or the circus.
Ten signs you're in an epic credit bubble:
Message 19397716 |
