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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Wyätt Gwyön who wrote (2338)	11/18/2003 3:10:42 PM
From: Real Man	Respond to of 110194

Yep. There was no reason to buy short maturity debt, but all reasons in the world to sell it, even borrow and buy longer maturities, such as 10-year or 30-year treasuries. But that's the usual carry trade that banks practice - borrow short term, lend long term. Not sure that the Yen carry trade has ended - that would put Yen much higher than it is today. Japanese CB purchases of treasuries alone cannot account for surprising dollar strength against Yen in the past couple of years, as the dollar fell 30%, yet Dollar/Yen did not get below 120 until September 2003. Longer maturities bonds were bubbling up until Summer this year - so, lots of reasons to sell Yen and buy 30 and 10-year treasuries, corporate, or agency debt. Or, rotate the carry trade into longer maturities.