Wednesday, May 30, 2012

Sovereign Bonds at all time lows across the world - Deflationary Wave

Bond yields across the globe dropped to record lows yesterday. U.S. Treasury yields fell to an ominous all-time low.   Beyond the U.S., German bunds and U.K. 10-year gilts fell to record lows too.  Finnish, Swedish, Australian, Canadian, Japanese, and Swiss yields fell to historical bottoms as well.   Yields on Spanish and Italian debt rose, reflecting their default risk.

The Forbes article goes on to worry about the upcoming time when the Fed begins to unwind its position.  Methinks that day shall never come, at least willingly.  If markets will be crushed by the Fed action, logic indicates that the Fed will not take that action. 

Clearly, the hammer poised above the US dollar is rising higher and higher, but the fact is, it will not fall until something else is capable of taking the USD's place.    It is not looking like it will be the Euro.

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