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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: GST who wrote (36735)7/22/2005 11:33:34 PM
From: mishedlo  Read Replies (2) of 110194
 
Email from Safe Money
4. Plunging U.S. Bonds and Higher Long-Term Rates!

Just yesterday, 30-year Treasury bond prices plunged by a full point, driving their yield up by more than a tenth of a percent. And that’s on TOP of the bond price declines and rate rises I’ve been telling you about in recent weeks.

Wall Street analysts pooh-poohed the bond market plunge. They say we can handle any reduced buying of U.S. Treasury bonds from China.

But again, they’re missing the point. This is not just about all the capital that’s been flowing into U.S. bonds from China. It’s also about the money flowing into U.S. bonds from Japan, Korea, Malaysia, Singapore, Taiwan, and the rest of Asia.

Remember? This is the capital that’s been keeping our long-term interest rates low and financing much of our housing boom.

As long as the dollar was stable against their currencies, it made sense for Asian investors to put their money in U.S. bonds. But now, will they continue to invest in the U.S. at the same pace? I doubt it.

In fact, yesterday’s landmark revaluation by three Asian nations may foreshadow the day when they actually begin to pull money OUT of our bond market.

Result: Falling bond prices and rising long-term rates.
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