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

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To: mishedlo who wrote (52735)	2/6/2006 8:29:15 AM
From: russwinter	Read Replies (1) of 110194

Actually the Liu article is one of the best at describing the destructive effects of a US Dollar hedgemony on Asia. In terms of understanding the credit and debt Bubble drivers in the US, this paragraph was notable. Overseas investors had built up arbitrage positions between JGBs and yen swaps on the assumption that swap rates would not fall below JGB yields. But 10-year swap yields were about 1.3% (November 27, 2002), 9.5 basis points below the 10-year cash JGB yield. This prompted liquidation of JGBs against swaps, leading briefly to serious contagion to other markets. This type of mini-crisis is now commonplace and hardly attracting notice in the financial press. One of these days, it will add up to a major systemic crash. We need to follow JGB and yen swaps rates. Anybody know where to find them? I think that's the big issue in the emerging struggle between the BOJ and MOF on Japan's exit from ZIRP. I believe the end of ZIRP signals the end of the massive US credit subsidy, wash, rinse, repeat machine.

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