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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: russwinter who wrote (18304)3/9/2004 9:02:15 AM
From: Wyätt GwyönRead Replies (1) of 306849
 
2-10yrs are not "T-bonds", which is what the author explicitly stated BOJ is supporting. neither are Agencys (re-read my quote). there are less than $200 BILLION worth of USTs maturing in 20yrs or later, so to anyone who thinks BOJ is "supporting" our long rates via this market, i say: ROFLMAO!

if a meaningful amount of BOJ purchases this year were truly of T-bonds, the 30yr yield would already have a 3-handle and the 10yr would have a 2-handle. as it stands, i expect a 3-handle after all the reflation lemmings are crushed.

it is easy to see how our yield curve is affected by Asian CBs. just look where it differs from Eurobund curve, as well as other Anglophone curves, which are all flat as a pancake. UST yield is extremely low close-in, but in fact is higher or exceeds many other industrialized nation curves on the long end. there is no support there. just a bunch of Wall St. lemmings running to equities and junk bonds.

Asian CBs buying in size have a huge liquidity preference for short maturities, and the Treasury has a huge preference for low rates. UST yield curve has a huge slope to the long end.

so both buyers and sellers both have a preferred habitat in the short end. ergo, BOJ buys short just as Treasury sells short.
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