Re: The Yuan ( Roubini's comment and US treasuries interestin read )

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tectol

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Re: The Yuan ( Roubini's comment and US treasuries interestin read )

in response to

The Yuan ( Roubini's comment and US treasuries interestin read )

tectol

posted on Jun 20, 2010 09:52AM

The US treasury article should be read along with Abstacey's last post :

Why are Investors moving to T-Bills?

posted on Jun 18, 10 08:54PM

Exerpt from that post :

" Back at the beginning of April, an upward breakout in U.S. commercial paper yields suggested traders were sensing trouble and dumping these securities. A few weeks later, the Greek sovereign debt problem broke full force, pulling down stock markets.

In a perhaps similar signal of "something wicked this way coming", T-Bill yields have been plunging the last two weeks.

The shortest-dated bills have been falling fastest. The 4-week security yield was down as much as 88% since the end of May. The 13-week bill dropped 59%. And the 26-week bill is down 35%.

This is a sudden and rapid fall. During the financial troubles late in 2008, short-dated T-Bills were in high demand as nervous investors cashed out of a risky assets and looked for somewhere safe to park their money.

T-Bills gave them the ability to earn a little interest without locking up their money for a long time. Just in case things turned around and better investment opportunities presented.

The drop in yields over the last two weeks suggests investors are once again heading for safety. Not totally surprising, given the still-lingering concerns over European debt.

But the interesting thing is the timing. Europe's problems came to light six weeks ago. And most of the panic selling seems to be behind us. In fact, over the last week the Dow is up 5%.

So why are investors jumping ship into T-Bills even as stock markets seem to be recovering? Are they seeing something else on the horizon? Here's to scanning for danger,

Dave Forest "

Roubini's comment also points out the interesting relation between the yuan the euro and the US $ . It seems as though currency traders will have a field day figuring this one out .

The consequences of the yuan revaluation might be more complex then it seems as to how the world economy will be affected by it . And i guess US politicians on the eve of the election campaign will grab the occasion on both side to turn it in their favor , with contradictory arguments of course ...

What will be the outcome for the US labor force is far from obvious , the same could be said for US businesses , some of them being very successfull in China while others having no business there .

The extent and the time the revaluation will take will determine the impact on both labour and businesses , and this impact will be felt both on the markets worldwide as well as on US treasury bonds . Will it increase appetite for risky assets or do the opposite ? I personaly don't know as this will happen as other economic events will intervene .

Of course if the US $ is to lose ground we can expect commodity prices to rise , on the other side if US treasury bonds appetite is to fall it might percipitate the problems of the US debt and worsen the crisis .

This could be another Pandora box wich is about to be open with consequences hard to foretell .