adios
02-11-2004, 08:08 AM
That's right $67 billion to intervence on the Yen's behalf. Of course there's no way they can keep buying US $ at that pace, at least I don't think so. From the article in the WSJ:
The Bank of Japan last month spent a record $67 billion to support the dollar to shield its export-dependent economy. Much of those proceeds are recycled into Treasurys.
Yep most of the US $ purchased buy US debt. At that pace it will finance the US budget deficit and then some (do these guys want to buy munis I wonder?). I've also read somewhere that the Japaneese are buying Mortgage Backed Securities as well (the MBS market is BIGGER than the Treasury market BTW). I saw that stats on new car sales either in December or January (can't remember which) and Nissan and Toyota are selling far more vehicles than American car manufacturers FWIW. We're not even talking about how much the Chineese are spending to prop up their currency. As well as other countries. The Eurozone hasn't gotten into the "swing of things" yet but lots of speculation that they will.
Weak Dollar Keeps Rewarding U.S. Bond Market
By BRIAN BLACKSTONE
DOW JONES NEWSWIRES
NEW YORK -- Euro-zone officials seemed to score a victory at the weekend meeting of the Group of Seven industrialized nations, securing a warning against volatile currency moves.
That is, until financial markets second-guessed them Monday, giving the nod to the U.S., whose bond market and economy continue to reap the rewards of a weak dollar.
By continuing to exert downward pressure on the U.S. currency, investors ensure that foreign central banks will remain heavy buyers of U.S. Treasurys. The U.S. benefits, as a soaring budget deficit stimulates growth, a weak currency spurs exports, and low yields encourage consumer demand.
"The U.S. is definitely winning -- no doubt about it," said Richard Gilhooly, senior bond strategist at BNP Paribas in New York.
Treasurys also gained Monday on some further buying after Friday's weaker-than-expected jobs report. At 4 p.m., the benchmark 10-year note was up 8/32 point, or $2.50 per $1,000 face value, at 101 17/32. Its yield fell to 4.058% from 4.089% Friday, as yields move inversely to prices.
The 30-year bond was up 11/32 point at 107 1/32 to yield 4.904%, down from 4.925% Friday.
Finance ministers of the seven major industrialized nations issued a statement that seemed to address European complaints about the extent of the euro's rise against the dollar. It said that "excess volatility and disorderly movements in exchange rates are undesirable for economic growth."
If successful, that call would likely have been a negative for Treasurys and would have disrupted the delicate balance of currency and bond-market forces that are expected to fuel 4% to 4.5% gross domestic product growth in the U.S. -- twice the rates hoped for in Japan and Europe.
Yet the dollar saw no reprieve Monday, and fetched close to historic lows against the euro and 3½-year lows against the yen, ensuring that the U.S.'s virtuous dollar and fixed-income cycle will continue.
The G-7 communique, which also stressed the importance of flexible currency markets, was "an indication that [Asian central banks] should continue [to buy Treasurys], and it helps hold down yields," Mr. Gilhooly added.
The Bank of Japan last month spent a record $67 billion to support the dollar to shield its export-dependent economy. Much of those proceeds are recycled into Treasurys.
Foreign central banks "are the biggest marginal buyer [of Treasurys], and in many cases, it's the marginal buyer that has the swing vote in prices," said Robert Gay, global strategist at Commerzbank Securities in New York.
Along with Japan, Asian countries such as China have been forced to buy U.S. bonds to keep their currencies in line with the dollar. Judging by overnight intervention by monetary authorities in Japan, China, Taiwan and South Korea -- on the first trading day after the G-7 gathering -- there is little hint that this policy will lose its popularity.
Intervention could even spread beyond Asia to Europe. With initial jawboning attempts having failed, Europeans are left with two options to boost the dollar against the euro: cut rates or intervene.
The former would have the most durable effect, say analysts at French investment bank CDC IXIS. They see the G-7 statement as "euro positive," removing the last obstacle to the euro's reaching $1.30. It fetched just under $1.27 Monday. That would in turn be a plus for euro-zone debt if it spurred a half-point reduction in European Central Bank rates, CDC IXIS said.
Still, rate cuts seem unlikely in the near term. ECB officials have shown no desire to cut rates from 2% -- which is twice the level set by the Federal Reserve -- despite the rising euro. The ECB has stressed that the recovery is under way and that rising global growth will benefit the region's economy.
Yet ECB dollar buying seems back on the table as an option, which, if it materializes, would give still another lift to Treasurys and the U.S. economy.
"It seems it would make the most sense to hold the course on what you think is the right [monetary] policy and squash foreign-exchange speculation by intervening," Mr. Gay said. "None of this bodes for much higher U.S. long rates anytime soon."
Updated February 9, 2004 8:25 p.m.
The Bank of Japan last month spent a record $67 billion to support the dollar to shield its export-dependent economy. Much of those proceeds are recycled into Treasurys.
Yep most of the US $ purchased buy US debt. At that pace it will finance the US budget deficit and then some (do these guys want to buy munis I wonder?). I've also read somewhere that the Japaneese are buying Mortgage Backed Securities as well (the MBS market is BIGGER than the Treasury market BTW). I saw that stats on new car sales either in December or January (can't remember which) and Nissan and Toyota are selling far more vehicles than American car manufacturers FWIW. We're not even talking about how much the Chineese are spending to prop up their currency. As well as other countries. The Eurozone hasn't gotten into the "swing of things" yet but lots of speculation that they will.
Weak Dollar Keeps Rewarding U.S. Bond Market
By BRIAN BLACKSTONE
DOW JONES NEWSWIRES
NEW YORK -- Euro-zone officials seemed to score a victory at the weekend meeting of the Group of Seven industrialized nations, securing a warning against volatile currency moves.
That is, until financial markets second-guessed them Monday, giving the nod to the U.S., whose bond market and economy continue to reap the rewards of a weak dollar.
By continuing to exert downward pressure on the U.S. currency, investors ensure that foreign central banks will remain heavy buyers of U.S. Treasurys. The U.S. benefits, as a soaring budget deficit stimulates growth, a weak currency spurs exports, and low yields encourage consumer demand.
"The U.S. is definitely winning -- no doubt about it," said Richard Gilhooly, senior bond strategist at BNP Paribas in New York.
Treasurys also gained Monday on some further buying after Friday's weaker-than-expected jobs report. At 4 p.m., the benchmark 10-year note was up 8/32 point, or $2.50 per $1,000 face value, at 101 17/32. Its yield fell to 4.058% from 4.089% Friday, as yields move inversely to prices.
The 30-year bond was up 11/32 point at 107 1/32 to yield 4.904%, down from 4.925% Friday.
Finance ministers of the seven major industrialized nations issued a statement that seemed to address European complaints about the extent of the euro's rise against the dollar. It said that "excess volatility and disorderly movements in exchange rates are undesirable for economic growth."
If successful, that call would likely have been a negative for Treasurys and would have disrupted the delicate balance of currency and bond-market forces that are expected to fuel 4% to 4.5% gross domestic product growth in the U.S. -- twice the rates hoped for in Japan and Europe.
Yet the dollar saw no reprieve Monday, and fetched close to historic lows against the euro and 3½-year lows against the yen, ensuring that the U.S.'s virtuous dollar and fixed-income cycle will continue.
The G-7 communique, which also stressed the importance of flexible currency markets, was "an indication that [Asian central banks] should continue [to buy Treasurys], and it helps hold down yields," Mr. Gilhooly added.
The Bank of Japan last month spent a record $67 billion to support the dollar to shield its export-dependent economy. Much of those proceeds are recycled into Treasurys.
Foreign central banks "are the biggest marginal buyer [of Treasurys], and in many cases, it's the marginal buyer that has the swing vote in prices," said Robert Gay, global strategist at Commerzbank Securities in New York.
Along with Japan, Asian countries such as China have been forced to buy U.S. bonds to keep their currencies in line with the dollar. Judging by overnight intervention by monetary authorities in Japan, China, Taiwan and South Korea -- on the first trading day after the G-7 gathering -- there is little hint that this policy will lose its popularity.
Intervention could even spread beyond Asia to Europe. With initial jawboning attempts having failed, Europeans are left with two options to boost the dollar against the euro: cut rates or intervene.
The former would have the most durable effect, say analysts at French investment bank CDC IXIS. They see the G-7 statement as "euro positive," removing the last obstacle to the euro's reaching $1.30. It fetched just under $1.27 Monday. That would in turn be a plus for euro-zone debt if it spurred a half-point reduction in European Central Bank rates, CDC IXIS said.
Still, rate cuts seem unlikely in the near term. ECB officials have shown no desire to cut rates from 2% -- which is twice the level set by the Federal Reserve -- despite the rising euro. The ECB has stressed that the recovery is under way and that rising global growth will benefit the region's economy.
Yet ECB dollar buying seems back on the table as an option, which, if it materializes, would give still another lift to Treasurys and the U.S. economy.
"It seems it would make the most sense to hold the course on what you think is the right [monetary] policy and squash foreign-exchange speculation by intervening," Mr. Gay said. "None of this bodes for much higher U.S. long rates anytime soon."
Updated February 9, 2004 8:25 p.m.