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

To: mishedlo who wrote (27764)	3/4/2005 9:35:46 AM
From: russwinter	Respond to of 110194

<pent up domestic demand for treasuries> There's "pent up" demand alright, the only problem is that like everything else in the Bubble system, they borrow billions to meet it. Let's see I count $69 billion ($5.3 a week), in the last quarter, that's a good chunk of the federal deficit, the carry trade lives, although note slight pause in the last five weeks. Solution I'm sure is to get the 2/10 spread back up over 100. Bank lending: govt securities. federalreserve.gov 11/17/2004 1137.9 11/24/2004 1153.7 12/01/2004 1150.3 12/08/2004 1139.8 12/15/2004 1136.8 12/22/2004 1158.9 12/29/2004 1157.3 01/05/2005 1166.7 01/12/2005 1160.8 01/19/2005 1187.1 01/26/2005 1186.5 02/02/2005 1196.2 02/09/2005 1208.7 02/16/2005 1206.8

To: mishedlo who wrote (27764)	3/4/2005 2:08:51 PM
From: Jim Willie CB	Read Replies (1) \| Respond to of 110194

Mish, the hedge fund speculative trades must be considered the flat yield curve, and refusal by the long end to rise with the Fed hikes is best explained by three factors, in order of importance the first and most powerful is the YEN CARRY TRADE it forces convergence in bond markets it aint no conundrum to me, not since last summer the decline of the USDollar and USTrez long rates go hand in hand with secular deflation twice as much bond income as bond expense out there i.e. twice as much money taken in as bond savings yield income as mortgage and installment loan borrowing expense so the lower interest rates go, the slower the economy gets the REPORT CARD on the Fed Reflate initiative is long rates dont be confused, apparently as RussW is, that raging cost inflation will push interest rates higher from asset erosion we only have cost inflation, which kills profit margins and household discretionary spending if China and India could be placed on twin asteroids, then costs could be passed along, price inflation on consumer items measured by the CPI would be detectable, jobs could be created, and wages would grow but Chindia is with us THE PRESENCE OF CHINA/INDIA GUARANTEES THAT COST INFLATION WILL NOT BE PASSED ALONG, UNLESS CHINA PASSES IT ALONG even then, the USA will be last in line for pricing power advantages the end result is more powerful forces to push LT rates down EVEN MORE 1. yen carry trade will not end, will never end, until we achieve close convergence of US long rates and Japanese long rates (why is this concept so consistently overlooked, when hedge funds have amassed over $800 billion of active spec money?) 2. recycled massive Asian trade surpluses into the only large volume markets for parked money 3. the Fed Reflation initiative has failed, and in its stead we have a powerful cost inflation phenomenon which smothers the US Economy I remain a jackass / jim