The Epic American Credit and Bond Bubble Laboratory Message Board

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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: orkrious who wrote (23541)	12/18/2004 9:37:33 AM
From: russwinter	Read Replies (1) of 110194

This is an extraordinary and important article, and the positioning right now in the rate COTs, supports this statement. Message 20867793 Appears there is a liquidity contraction gradually developing. The CBs have been MIA since 12/8: Message 20864411 In any financial disturbance, the sensible money goes straight to liquidity, which in the past has always been gold or short-term Treasury bills in the senior currency. I was absolutely startled earlier in the year to learn that other senior central banks and Japan were buying U.S. Treasuries as far out as 10 years, because that suggested they were speculating rather than positioning for reserves. What can happen is that the Bank of Japan could start selling the longer Treasuries, but at the same time it might also be buying shorter-dated Treasuries. So the effect on the dollar would be negligible, but it sure as hell would steepen the yield curve.

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