random2348

The Run to Safety: Ten-Year Treasury Hits All-Time Low

I'm not sure why that link doesn't work - try this one instead: www.google.com/search?...

The Run to Safety: Ten-Year Treasury Hits All-Time Low

Look at where Japan and the U.S. rank on this list:

www.cia.gov/library/pu...

Shorting U.S. Government Risk

Let me stress that I believe that it is very unlikely that the U.S. will ever default on its debt (maybe "default" is too strong of a word - yes, the U.S. can always print more dollars - let's say "restructure" instead - and by "restructure" I mean changing the terms of its obligations in a way that is akin to default, not merely adjusting the mix of bills, notes, and bonds). Until recently, the conventional wisdom was that for the U.S. to have to restructure its debt would be basically impossible - even now, if someone asks you for "risk-free rates," you're probably going to look up Treasury yields. Well, maybe a future debt crisis that results in a restructuring is not impossible, but just very unlikely. Note that foreign governments would bear much (but not all) of the pain of a restructuring.

Shorting U.S. Government Risk

dkp,

OK - bad example. How about this one, then? en.wikipedia.org/wiki/...

"Russia's ruble-denominated debt would be restructured in a manner to be announced at a later date"

Shorting U.S. Government Risk

apppro,

If confidence returns to the stock market and the credit markets, then Treasuries are likely to sell off. To some degree, shorting Treasuries is a bet that financial markets will normalize and risk aversion will decline. But it is also bet that stands to gain if the U.S. government issues such a massive amount of debt in order to finance the bailouts that the new supply of Treasuries overwhelms the flight-to-safety demand.

Shorting U.S. Government Risk

dkp,

Note that credit default swaps on Treasuries are quoted in Euros. See

www.bloomberg.com/apps...

It is not necessarily the case that one's counterparty has failed when the U.S. has failed. In particular, a counterparty not based in the U.S. might not have failed at the time of a U.S. government debt crisis.

Credit default swaps on Iceland's debt - also snake oil? They can always print more krona to repay their debts, right?

The CDS market is saying that the probability of the U.S. defaulting on its debt is very small but non-zero.

Is It Time to Short Bonds?

Obama's Yuan Calls May Cause Collision With China

www.bloomberg.com/apps...

"Obama said China must stop manipulating the currency in a letter to the National Council of Textile Organizations released on Oct. 24. The People's Bank of China has kept the yuan almost unchanged against the dollar since mid-July as it shifts focus from countering inflation to sustaining growth amid a global credit crisis. The Foreign Ministry said last week the U.S. shouldn't blame its trade deficit on exchange rates."

There could be a trade war with China. American manufacturing has been demolished by China and the yuan peg will be an attractive target for Obama. How can American manufacturers compete with a foreign competitor who keeps its currency artificially weak? (Some people may dispute that the yuan is being kept artificially weak. Well, why not let it float and let's see where it ends up?) I don't expect China to dump Treasuries even if there is a trade war, but I think it might curtail its purchases somewhat.

Is It Time to Short Bonds?

www.bloomberg.com/apps...
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Summers said ballooning debt isn't a major issue for now because there's ``excess demand'' for Treasuries rather than excess supply, as investors flock to government debt as a haven.
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