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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: Jim Willie CB who wrote (6819)2/3/2004 11:32:03 AM
From: mishedlo  Read Replies (2) of 110194
 
I dont mind disagreeing
do you expect no effect on TNX rates...
from rising USGovt debt requirements,
from continued Asian diversification away from US$-based,
from Chinese diversion to credit supply of growing middle class,
from rising commodity prices (incl energy)
from rising Asian import product prices
??????

these are the forces which will provide bond yield headwinds
how about commenting on how all the above will be overcome, and lower rates will occur


Treasuries are really quite simple
1) As long as China and Japan have more to gain than lose by buying US treasuries, they will continue to do so. I do not think China is close to being a self-sustaining growth engine. Perhaps a couple years. Right now they benefit for supplying cheap goods to over-stretched US consumers
2) As long as the Carry trade can make money borrowing at 1% and lending at 4% they will continue to do so. It is probably one of the biggest sources of bank profits. I do not think greenspan will want to prick that "bubble" unless and until we have a genuine recovery here that produces jobs and higher wages.
3) I do not think this economy is providing higher jobs and wages. In fact I guarantee you that it is doing just the opposite.

If Russ was in charge of the FED my analysis would be much different. Russ is not running the FED.

Mish
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