What Is A “Household” And Why Are They Buying Treasuries?
By James Bianco – June 15th, 2012
CNBC – Guess Who’s Buying All the Bonds? (It’s Not the Fed)
Mom-and-pop investors, and not the Federal Reserve, have been the ones most responsible for driving the mad dash to government debt, according to newly released data. The Fed’s ambitious Treasury-buying program has pushed the central bank’s balance sheet to $2.83 trillion … “The conventional view is that 10-year Treasury yields have been pushed down to 1.5 percent and 10-year (Treasury Inflation Protected Securities) yields to -0.5% by the actions of the Federal Reserve and the safe haven demand from foreign investors,” Capital Economics said in a research note. “The reality, however, is slightly different.” The demand among average investors has swelled so much, in fact, that they bought more Treasurys in the first quarter than foreigners and the Fed combined. …
(Ah, now we know who the bag-holders are. Is this not like the case in Spain where households have been buying the Spanish bonds that are now being subordinated to new ECB bonds thus fleecing those Spanish bag, er, bond holders of their wealth?
And speaking of Spain; we think we have a housing bubble bursting here? Somehow “bubble bursting” doesn’t seem to quite express what will be happening in Spain.)
Spanish Assets Wildly Overweighted with Housing
By Barry Ritholtz – June 15th, 2012
Real Estate comprised 79% of Spanish household assets, according to Jon Carmel at Carmel Asset Management (he credits the chart above to Oliver Wymann). That is 50% more than many other European countries, double the UK and triple the US.
I would expect mean reversion to be rather discomforting. (See chart.)
Icliks Incoming 