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: russwinter who wrote (20038)	1/3/2005 3:56:21 PM
From: mishedlo	Read Replies (1) of 116555

rigged bond market? Message 20903621 Reply from Heinz: 'legitimate' vs. 'rigged' bond rally? i don't quite get that one. imo the US bond market is far too large to be successfully rigged by anyone. as for the government's budget deficit, Japan's budget deficit as a percentage of GDP is more than twice as high than the US deficit. this didn't prevent JGB yields to fall to 0.45% at one point. it is not the size of the budget deficit that's important in this context - it is the market's perception of whether the government is or isn't likely to default on it. the supply of outstanding bonds of course increases with a higher budget deficit, but i would expect e.g. the banks to flee their more risky assets (such as mortgages) in coming years and shift their asset base toward the 'safest' debt - which is the government's. again, see Japan - it has happened there.

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