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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: ild who wrote (23518)12/17/2004 5:55:42 PM
From: russwinter  Read Replies (4) of 110194
 
Even a couple sloppy days and a good bond market sell off brings out absolutely no fear:

finance.yahoo.com^VIX&t=5y&l=on&z=m&q=l&c=

Looks like the commercials are now playing for a spread widening, with somewhat higher rates at the intermediate and longer end. That's the Andy Xie recommendation to China, take durations very short, get out of longer dates.
morganstanley.com
Maybe that's what's coming?

I still believe that Asian central banks should shorten the duration of their dollar reserves as much as possible. At a minimum, Asian central banks should park the increases in their dollar reserves in the money market in order to decrease the distortion in the US$ yield curve.

Shortening the duration of Asia’s dollar reserves would remove a perverse incentive for the US to push down the dollar. When a policymaker in Washington talks down the dollar, it incites hot money flows into Asia. If the Asian central banks mop up the hot money and buy US treasuries with it, it depresses the US bond yield and boosts the US economy. The US is in a win-win situation by talking down the dollar.

If Asian central banks cease buying US treasuries with the dollars from their currency market interventions, the US bond yield will rise when the US policymakers attempt to push down the dollar, canceling the benefits of a weaker dollar for the US economy.
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