The heavily indebted country of Japan can borrow as much as they like, out 20 years, and pay zero interest to boot. Once the 30 and 40yr bonds go negative, the entire Japanese yield curve will be negative. At the present, Japan can borrow as much as they like, going out 40 years, for 0.08%. Should you go buy a television on one of your credit cards, you’ll be paying 39.99%.
Are we clear?
Free money is only free for the select few.
The US 10 yr is down to 1.34%, down 2 bps. Listen to me, investors can’t buy these bonds fast enough. From Germany to Italy to fucking Portugal, money is seeking out bonds and buying them. The QE programmes in Europe and Japan are perverting the market place and advantageous traders are front running them, which is why American bonds trade at a discount to those in Europe.
Japanese 10 yrs are now yielding -0.26%.
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What is the endgame here? Do these negative bonds just decline til the country implodes? -1%? -3%?
Soon mrs watanabi will be putting yens in the takami mat. Bank run. That is the end game.
Dr. Fly, can you explain what you mean by “advantageous traders are front running them, which is why American bonds trade at a discount to those in Europe.”? Thanks in advance, and for all the hard work.
The ECB has scheduled 90 billion in bond purchases per mo. Everyone knows exactly which bonds they will buy. Hence, buying ahead of their scheduled purchases has been a dunk shot win.
I know there’s no predicting what the FED lunatics will do, but how far down can this drag US treasuries? Can they go negative even if the FD holds interest rates steady? I was holding cash but now I’m thinking beans and bullets.
Makes complete sense, thank you for the response good Dr.
Sure, we can go negative too