"If the Long Bond goes to 6% soon, I think we can all point a finger at Japan with a high degree of confidence that they are responsible for the caper."
Paul,
I hope I didn't misread your complete post on the currency thread, but I believe that the rise in US rates (sell off of treasury bonds) has not been a two month phenonmenon. More like just a three week one. I believe it started with the very strong, "new jobs," report of February 5th. Then it just seemed to snowball from there. Japan's rates did move up at around the same time, and this appeared to exercerbate the sell-off of US treasuries so they spiked up even higher to the 5.4% or 5.5% level. I think there was a, "fear," Japan was selling, but I don't believe this is something that is easy to track. It may have been simply fear that drove bond prices down (and rates up).
But since then, if anything, Japan is certainly hoping our rates will stay lower. Japan's MOF has been doing what it can to both, lower Japan's rates and weaken the yen. I do not see how it's in Japan's interest to put a damper on their number one export market. On the contrary, it appears the US and Japan work very closely, hand in hand, knowing stability is very important for both economies.
My guess is the rates spiked up just on simple fundamental fears and US rates will drop (bond prices will rise) on lessening worries. I just do not see the Japanese cutting their nose to spite their face. But you have an interesting theory nonetheless.
MikeM(From Florida)
PS Here's some fundamental news that should bode well for the US bond market.
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Mr. Yen says Japan tolerates weak yen - Nikkei
NEW YORK,Feb 22 - Japan tolerates the weak yen against the U.S. dollar as a consequence of its easier credit policies, Eisuke Sakakibara, vice finance minister for international affairs, told The Nihon Keizai Shimbun in its interview. Tuesday's edition of Nikkei, monitored in New York, quoted him saying ''The fall (of yen) so far is attributable to easier credit policies.''
Sakakibara said a climb in long-term interest rates since the end of last year was pushing up the yen, but the MOF did not foresee the plunge in bond prices. He added that the ministry has been using all available means to quell the market, such as resumption of buying government bonds via the MOF's Trust Fund Bureau.
Referring to yen-selling market intervention in January, he said, ''An excessive rise in the yen should be avoided. Although we will not refer to a target level, we must send a message (to the market) at some point.''
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U.S. Posts Larger-Than-Expected $70.3 Billion Budget Surplus in January
Washington, Feb. 22 (Bloomberg) -- The U.S. government posted a larger-than-expected budget surplus in January as the Treasury benefited from the strong economy and a lessened need to borrow money in financial markets.
The surplus totaled $70.336 billion in January compared with a January 1998 surplus of $25.379 billion, Treasury figures showed. Before the budget statement was released, analysts expected a surplus of $64.1 billion for last month.
The U.S. government is expected to record a surplus of as much as $100 billion for the fiscal year that ends Sept. 30, after posting a $70 billion surplus last year -- the first since 1969. ''The big picture is one of building surpluses for the next several years -- at a minimum,'' said William Sullivan, an economist at Morgan Stanley Dean Witter in New York.
The economy is growing fast enough that ''surplus estimates will soon look too low,'' said Christopher Low, an economist at First Tennessee Bank in New York. U.S. gross domestic product grew at a 5.6 percent pace or better in the final quarter of last year. And the current expansion is set to enter its ninth year in April with no sign it will come to end soon.
As a result, the Treasury is flush with cash and government debt issuance will once again have to be cut, Low said. The Treasury paid down a net $155 billion in publicly traded debt since mid-1997, according to Sullivan, because it had the surplus to do so. |
