More Bonds & BS Part II
According to the FED, subprime will not be a drag on the US economy... the Nattering One muses... looks like it will effect the Japanese economy.
From Bloomberg:
In the past week, Japan's 10 year bond futures rose after downgrades of debt backed by U.S. subprime mortgages sparked demand for the safety of government securities.
"Rising stock prices are prompting a sell off in the debt market." said Shinji Hiramatsu, who helps manage the $5.69B at Sompo Japan Asset Management Co. in Tokyo.
The Nattering One muses... chicken or egg? The debt market unwind is causing stocks to rise as portfolios are reallocating from bonds.
The risk of owning Japanese corporate bonds rose to the highest since March, according to traders of credit default swaps.
The spread between conventional Japanese government debt over inflation linked bonds, known as the breakeven rate, was about 54 bps.
The spread which shows what the market expects consumer prices to average in the next decade, has risen from a 3 year closing low of 38 bps on March 8.
Daisuke Uno, a strategist at Sumitomo Mitsui Banking: "The direction of Japan's bonds is largely dependent on how the U.S. economy performs and it's obvious that the subprime problem will be a drag on the overall economy.
Yields are too high and they will slip lower as economic growth in U.S. and Japan slow.
Bonds will gain after the central bank raises rates in coming months, amid skepticism the economy is strong enough to handle higher borrowing costs."
From Bloomberg:
In the past week, Japan's 10 year bond futures rose after downgrades of debt backed by U.S. subprime mortgages sparked demand for the safety of government securities.
"Rising stock prices are prompting a sell off in the debt market." said Shinji Hiramatsu, who helps manage the $5.69B at Sompo Japan Asset Management Co. in Tokyo.
The Nattering One muses... chicken or egg? The debt market unwind is causing stocks to rise as portfolios are reallocating from bonds.
The risk of owning Japanese corporate bonds rose to the highest since March, according to traders of credit default swaps.
The spread between conventional Japanese government debt over inflation linked bonds, known as the breakeven rate, was about 54 bps.
The spread which shows what the market expects consumer prices to average in the next decade, has risen from a 3 year closing low of 38 bps on March 8.
Daisuke Uno, a strategist at Sumitomo Mitsui Banking: "The direction of Japan's bonds is largely dependent on how the U.S. economy performs and it's obvious that the subprime problem will be a drag on the overall economy.
Yields are too high and they will slip lower as economic growth in U.S. and Japan slow.
Bonds will gain after the central bank raises rates in coming months, amid skepticism the economy is strong enough to handle higher borrowing costs."
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