Japan's Holdings of Treasuries Changes Things Every Day.
How much did Japan's buying of the US$ change things.
Things were changed over time by the accumulation of treasuries by Japan. And, the fact that they hold .8 trillion of treasuries changes things, every single day. And that's just Japan. Collectively, foreign CB's have effectively removed a substantial percentage of supply of Treasuries from the tradeable float. The market believes they cannot sell. The Daily Reckoning for example also asserted the obvious: what is the point of Mr. Asakawa's blue beeper by his bedside? Both he and his country are imprisoned with their treasury holdings. Mr. Asakawa might as well sleep.
Again, this distorts the tradeable float, severely so. Which leaves the other market participants to haggle over the float itself--but, in the shadow of the locked-up mountains of potential supply, held by the foreign CB's.
What you get is one seriously effed-up market that no longer tells us anything--except what people do in the face of such distortions. Again, this is why you have such high negative sentiment among active bond market participants--more associated with a market bottom, not a top.
You speculate (poorly IMO) that if Japan stops buying treasuries there will be no other buyers. I disagree.
Yes. When you accumulate an amount of US Treasuries that represents at least 8+% of our country's entire money supply, I speculate that any changes introduced by such an entity (Japan) to either that accumulation, or, holding, is unlikely to be mopped up by other buyers.
More broadly however, I should say that the most pointed aspect of my interest in this subject is not in the possiblity that foreign CB's either dump, or stop accumulating holdings. That is a tad dramatic, and over-focus on such an event is leading people astray. (Not you, though. I think you see through this as well.)
Rather, my interest is in the way the market is distorted, and how that gives birth to distorted analysis of the market in its present condition.
Best, LP |
