US agencies sink with Treasuries on overseas worry

[54anickel]

This ain't good. :scared:

http://www.forbes.com/markets/currencies/newswire/2004/01/23/rtr1224988.html

NEW YORK, Jan 23 (Reuters) - Sinking U.S. Treasuries prices
deflated the U.S. agency market's sails on Friday, with spreads
ending mixed after narrowing all week, as bid lists emerged and
nervousness flared about the extent of future foreign demand
for U.S. debt.

A catalyst for the downturn was a Reuters story quoting a
European diplomatic source saying euro zone ministers at
February's Group of Seven meeting will say that further euro
strength could spur a European Central bank interest rate cut.

A higher dollar means less intervention money from foreign
central banks with which to buy Treasuries and agencies, bond
strategists said.

more...

[Toots]

1. Let me get this straight ~ They cut the interest rate at European

Bank and that is supposed to make people want to switch to European treasury notes rather than American. I don't get it.

[54anickel]

3. ECB cutting interest rates probably won't help anyway, but they are

trying to get traders worried about it enough that the stop shorting the dollar in favor of the Euro.

Under normal market conditions, lowering interest rates is a way to slow down the appreciation of your currency. But the Euro's high value to the dollar has more to do with currency market interventions than normal market conditions.

China is pegged to the dollar so the yuan moves up and down with the buck. But Japan's yen is a floating currency, so as the dollar drops, the yen goes up making Japans exports to the US more expensive, and Japan's biggest competitor is China.

To keep the yen value from going to high, the Bank of Japan has been buying our Treasury notes (debt) like hot cakes, even putting themselves in hock to do so. Other countries have also been intervening (buying our debt), but not to the extent of BoJ.

If other countries get fed up buying our debt for little to no return and stop, the dollar will plunge to the 3 cent value of the paper it's printed on.

[aquart]

2. No one will buy our bonds, or trust in our future.

That Bush bastard in the White House has made us a third world country.

May he never sleep.

[teryang]

4. The dollar decline will continue

The heroic measures and extensive diplomatic and propaganda campaign to save the dollar won't break the trend.

Look for increasing American interest rates and a collapsing economy after the election.