Monday, December 8, 2008


Simply stunning!!! We are either headed for a catastrophic 2009 where job losses are going to escalate and growth rates are going to turn sharply negative, or the world economy is in a state of 'irrational panic'.

Yields on 3 month U.S treasuries are near zero!!!
Points to note:

  • Is this a US Bond market bubble, as risk aversion has pushed international central banks to favour U.S. Treasuries over GSE debt?
  • Has this bond market bubble been supporting the USD?
  • As Crude Oil prices have corrected substantially, the Middle East nations are going to be less aggressive buyers of U.S. Treasuries.
  • Asian Central Banks are using their accumulated Forex Reserves to stimulate local economies by funding infrastructure projects, supporting their local banking industry and aiding sectors of the economy that are witnessing slowing growth; this is going to slow down purchases of US Treasuries. China, Russia and India are cases in point!
  • Lastly, when the 'shorts' sense overvaluation in any market, and once selling kicks in; beware a stampede out of this 'safe' haven.


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