Posted on 08/22/2010 9:18:47 PM PDT by Faketan
The old saying goes that just because you're paranoid doesn't mean everyone else isn't in on it. It's starting to feel that may be true in the bond market.
For years (even decades) there have been theories about collusion between America and Asia in the government bond arena. Through the 1980s and 1990s, Japan supported America by buying Treasuries. And since 2000, China has stepped into that fray. Using its trade-earned dollar holdings to invest heavily in American paper.
The conspiracy camp says Asia has been brow-beaten by America into doing so. There is no sound business case for them to be investing in U.S. bonds.
The anti-conspiracy answer is that Asian nations are acting autonomously, based on their best analysis of the global investment landscape. They're not trying to help America, just to help themselves.
Recent data seems to argue for the former case.
There's been a lot of talk lately about the fate of U.S. government housing agencies like Fannie Mae and Freddie Mac. These agencies are in trouble, on the back of trillions of dollars in bad home loans. Everyone knows it, and lately the American government seems to be putting on a push to find a solution. Full article at: Government Bonds
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