Madame.
You make a good point re: "The Japanese institutions borrow at .5 from gov't, buy our US treasury 10 yr bonds at...oh, say 5.4% and pocket the difference "
Mind you it's not only the Tokyo 'gnomes' <g> that play this 'carry trade', my understanding is even in these Nothern Back Woods the 'carriage trade' is playing that 'carry trade'.. <gg>
Naturally these Northern Gents (wich I am not) dont get to borrow at the 'discount window' rate, but I was told they are perfectely content
to be short Yen & long Treasuries.
On the other hand, my reference to potential Treasuries sales by Japanese Gvt. agencies is illustrated by a recent article in the G&M :
"Japan's ruling LD party is considering using money from gvt. pension programs.. to buy Japanese Banks preferred shares in a move to bolster their dwindling capital reserves.. speculation that such a plan might be financed by selling US Treasuries helped drive the US dollar down.. it also hurt Treasuries.."
This price action took place Friday. If this senario is played out the Dow wont like it IMO.
Re Asian turmoil:
""Dollar/yen ended lower on Wednesday but retained most overnight
gains as Asian woes deepened in the Korean peninsula and amid
festering doubts Japan would revive its economy anytime soon,
dealers said.
The session peak, reached according to Reuters 2000-1 Dealt Rate
Service, eclipsed the May 1997 127.46 level to mark the highest
dollar/yen rate since August of 1992. Several New York dealers
claimed dollar/yen got no higher than 127.43.
Deteriorating Asian sentiment worsened overnight after the
resignation of South Korean Finance Minister Kang Kyong-shik and a
subsequent won drop to a record low at 1,034 per dollar.
Tokyo's Nikkei 225 index slipped more than 884 points on
Wednesday, or 5.29 percent, after the South Korean news and amid a
lack of confidence that Japanese bank troubles would be softened
by fiscal measures.
"The acceleration of the yen weakness is linked very much to the
deteriorating situation in Korea, continued negative scrutiny on
the Asian policy making backdrop and a two-day Nikkei rally that
failed," said Lisa Finstrom, currency analyst at Smith Barney. ""
Lets wait & see !! |
