Re: Yen vs US Dollar / Japanese Bonds vs US Bonds
Zeev,
How fast perception can change. The current break in bonds may just turn out to be a, "fake," after all. But of course, this is still without this weeks economic data. Friday's news had investors shaking in their boots (I was one of them). Today, things are turning out to be quite benign. I thought the dichotomy was interesting enough to post.
First, here's some clips from Friday's news:
US Treasurys took a veritable beating Friday, which intensified in afternoon dealings and was exacerbated by thin volume on the heels of an early 2 p.m., ET, close and a holiday on Monday
The sell trigger was pulled by fears that rates will head higher in Japan and choke Japanese government bonds (JGBs). Players fear that will push Japanese accounts to trash Treasurys in an effort to stem their domestic losses.
Japanese bond futures and the dollar also took a beating as marketeers expressed their disappointment with the outcome of Friday's BoJ meeting, which failed to produce a plan to curtail the rise in JGB yields.
The rout in the Japanese bond market is only part of the story behind the recent selling in the bond market, according to Josh Feinman, global economist at Bankers Trust. Marketeers are predicting a huge rout in the JGB market on Monday -- JGBs weren't able to react to the BoJ news Friday, since it hit the wires after the market had closed -- and are consequently anticipating a big downward Treasury move when trading resumes on Tuesday.
Now here's some clips from today's news:
The dollar rose against the yen to a two-week high on speculation Japan may be pressured to act more to drive down bond yields and weaken the yen to revive its economy.
Pushing up the dollar were comments by Eisuke Sakakibara, Japan's vice finance minister for international affairs, who said he welcomed a weaker yen after the Bank of Japan eased monetary policy Friday.
The yen, which had surged to a one-month high of 111.75 to the dollar on Feb. 3, when the bond yield rose to a record 2.44 percent, plunged to 115.52 to the dollar Wednesday when the yield came down to 2.0 percent.
For some reason the financial press went crazy on Friday trying to worry the markets? Oh well, what else is new. It will be very interesting to see what ACTUALLY unfolds here that will impact US interest rates, the yen/dollar relationship, and most important to us all, the equities market.
MikeM(From Florida)
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