We know the BOJ/Japanese Treasury has been selling US Treasuries at least since May. The speculation is the Yen trade will ripen and many Japanese institutions will sell their US Treasury holdings. The US Treasury and FED have laid in plans to buy the long end of the curve if this happens…or gets out of hand.
The Yen has begun to make its move. How far this goes is not know but the Yen definitely is breaking out. The trend remains down but the trend is at risk.
We can begin to wonder if the global bond markets are going to crash sooner rather than later.
Strong dollar is expected from rising interest rates. But many complain it makes US exports more expensive. So weaker dollar is a plus–provided it’s an orderly transition that does not cause panic.
With an industrial policy the appreciated dollar brings down nominal input costs. While the US industrial build out brings about a global deflationary impact as an American export.
The buying of the long end of the curve would be to stabilize a bond market in crisis. It also keeps the dollar from a massive appreciation which otherwise would do a lot of harm to the global economy. We have already heard smaller economies are suffering greatly the current appreciation in the USD.
yes and no, there is more than one way to skin a cat. Poor cat.
The yields will be much higher. For instance getting over 6% after the FED intervenes at the higher yields means a major rise from today’s yield. That means the yield will be appreciating the value of the dollar which cuts off inflation. Even as the FED stabilizes the yields by buying the long end of the curve.
