Treasury Bubble, meet Pin!


“The price of bonds (along with all other securities) is established by supply and demand. … So the only way that the yield on Treasuries (or any other security) can rise is if supply overwhelms demand. … The central banks have manipulated the market for sovereign bonds by creating (demand) out of thin air and buying bonds … to suppress interest rates. …

“If we put these dynamics together, we can sketch out a few possible conditions that would have to be met for U.S. Treasury yield to rise:

1. The Federal Reserve (the central bank of the U.S.) would have to be restrained from printing money to buy Treasuries. …
2. The supply (issuance) of new bonds rises to levels that overwhelm demand. …
3. Other sovereign-debt markets that are currently being sold in favor of U.S. Treasuries would have to become more attractive in yield, liquidity and safety than Treasuries. …
4. The phantom wealth in risk-on assets would have to dissolve on a global scale, forcing owners of unleveraged assets such as Treasuries to dump their Treasuries en masse to raise cash to pay down U.S.-denominated debt … Real estate may retain more of its value than oligarch toys (which will quickly go no-bid), but real estate is famously illiquid; the margin call must be paid in days, and finding a buyer for luxe real estate takes longer than days.

That leaves precious metals and the amazingly liquid Treasury bonds as assets that can be sold …

“I see #1 and #4 as the most likely triggers of a rise in Treasury yields. The … implosion of phantom-wealth bubbles is assured. (What Will End the 34-Year US Treasury Bond Bull Market?)

“Now, BNP is out with a note calling China’s equity bubble ‘a microcosm for the overall economy: unsustainable growth in leverage masking ever-deteriorating fundamentals and increasing future downside risks.'” (China’s Stock Bubble Leaves BNP Speechless: “What Happens Next Is An Unknown-Unknown”)

“Apparently, Obama, though he says he hasn’t made up his mind about whether to send weapons to Ukraine, actually has and is.” (U.S. Ships 50 Bradley Tanks to Ukraine: Europeans Are Furious)

Advertisements

About icliks

Biding my time in central ms ... yours too, if ur reading this.
This entry was posted in economy, Financial World and tagged , , , , , , , , , , , , , , , , , , . Bookmark the permalink.