Mish's Global Economic Trend Analysis Message Board

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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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To: gregor_us who wrote (19888)	12/30/2004 10:44:48 AM
From: mishedlo	Read Replies (2) of 116555

How many beeps shall we assign to the absence of foreign CB selling of US T-Bonds? No, I am not suggesting they have any reason to sell en masse--but, equally, is it reasonable to mark these holders as permanent? I think not. You can't throw a "so what", Mish, in the direction of foreign holdings of US Treasuries. Why can't I? They might sell stocks or they might sell bonds or they might do nothing or they might all go to gold and silver, or they might do nothing, or Japan might decide to seel while Europe decides to buy, or for that matter they might decide it is in their best interest to BUY MORE! As for how many beeps? Who knows. It seems like a reasonable number. How much did Japan's buying of the US$ change things. For all that intervention did they move the YEN 15%, 10%, 5%, 8%? Care to put a number on it? Why should treasuries be much different? Let's say Japan moved the YEN 10%. If you want to apply that to treasuries at 4% and say 40bps then fine. What I am suggesting is that it is not easy to modify the trend thru intervention. In the grand scheme of things 40 bps is not a lot either. Finally I do not necessarily agree that buying treasuries is intervention. They are looking for a place to park US$ and that is a vehicle that for whatever reason happens to be in the best interest of Japan (or so they think). You speculate (poorly IMO) that if Japan stops buying treasuries there will be no other buyers. I disagree. If there would be other buyers then perhaps Japan did not move treasury yields at all! A very reasonable figure would be about 25bps, and that is the one I will make right now. Mish

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