# US Bonds/Interest Rates



## wayneL (13 April 2006)

... are drilling down to new lows this morning (US time). This means longer term interest rates are going up.

Ominous


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## Smurf1976 (14 April 2006)

Been watching for a while now (years). Looks like the ultra low interest rates are over. And here in Australia, bank bills seem to be rising in yield too so up we go with interest rates it seems.

Just watch the real estate rampers try and put a positive spin on that one. With an ever increasing number of properties for sale and the increasingly common use of the words "price reduced" in property marketing (at least that's what's happening in Tas) it's going to be hard. Hang on a minute! I know... "Housing affordability improves". Yes that's it! Affordability improves, the polite way of saying "house prices fall". 

I don't have any grudge against property investors as such. It's just that the absolute arrogance surrounding the property boom, profits from which are gained largely at the expense of ordinary home buyers who simply need somewhere to live, has become VERY irritating to say the least. The real investors running a genuine landlord business won't mind price falls one bit, actually it's a buying opportunity for them, but it seems to be game over for the arrogant "property millionaires" who delight in telling young couples that they should have bought when they were in primary school. Arrogance preceedes a fall...   

As for the stock market, be careful IMO since rising interest rates aren't exactly helpful. Indeed the US Fed has a history of continuing to raise rates until something breaks. Only question is what breaks first. Probably housing IMO (anecdotal reports from the US suggest real estate there is already in serious trouble in some regions) but if not housing then the stock market is a likely candidate for a slide. Keep setting those stop losses...


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## noirua (14 April 2006)

Smurf1976 said:
			
		

> Been watching for a while now (years). Looks like the ultra low interest rates are over. And here in Australia, bank bills seem to be rising in yield too so up we go with interest rates it seems.
> 
> Just watch the real estate rampers try and put a positive spin on that one. With an ever increasing number of properties for sale and the increasingly common use of the words "price reduced" in property marketing (at least that's what's happening in Tas) it's going to be hard. Hang on a minute! I know... "Housing affordability improves". Yes that's it! Affordability improves, the polite way of saying "house prices fall".
> 
> ...




A very interesting post; as I hold shares in Rinker Group that have risen steadily in value, property prices in the US are all important, particularly those in the new building sector. Interest rates are forecast to rise by 0.5% to 0.75% in the US in the near term. The US currency should strengthen against the Aussie, but there are problems for the property sector in this, unless interest rate go down shortly after.

Chinese trade and the strength of the Yuan are another factor. My own view is that the DOW 40 will continue on up regardless of interest rates, I can see you have fears it may not. Perhaps the mining and oil sectors are most vulnerable and it depends which stocks are in the index. If metal and oil prices fall then interest rates rates should stabilise, if not there could be a big shake out it in certain economies and Australia could boom as it did in the early 1900's.


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## Smurf1976 (14 April 2006)

noirua said:
			
		

> My own view is that the DOW 40 will continue on up regardless of interest rates, I can see you have fears it may not. Perhaps the mining and oil sectors are most vulnerable and it depends which stocks are in the index. If metal and oil prices fall then interest rates rates should stabilise, if not there could be a big shake out it in certain economies and Australia could boom as it did in the early 1900's.



My basic view is that _something_ in the economy will "break" and until that happens, US short term interest rates will keep rising or at least not fall. That's just based on history. Knowing what that something that breaks will be is the hard bit. 

Just to raise another possibility (I'm not saying it's likely) but it's possible that oil and other commodity prices could move in different directions. A major oil shock (for whatever reason) would send the oil price to the moon but the resultant economic slowdown (physical oil consumption would have to fall due to lack of short term supply at _any_ price which implies a slowing overall economy) would cut demand for commodities in general. So oil up whilst other commodities (with the possible exception of energy commodities) fall. It's possible IMO but whether or not it's likely is another matter. The ongoing tensions in Iran is my underlying thinking here.


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## professor_frink (14 April 2006)

Smurf1976 said:
			
		

> I don't have any grudge against property investors as such. It's just that the absolute arrogance surrounding the property boom, profits from which are gained largely at the expense of ordinary home buyers who simply need somewhere to live, has become VERY irritating to say the least.



I think you probably do have a grudge Smurf! But it's ok to admit it. I have one too! I've had so many arguments with people who think that it's the only way to invest. typical convo goes like this-
*them:* just bought another investment property(looking at me expecting me to say well done mate!)
*me:* Did you think about putting some money in the sharemarket?
*them:* (looking at me like I'm insane)na too risky mate-might crash. Can't go wrong with a property- it never goes down.
*me:* (rolling my eyes) don't you think having 6 investment properties and only $1200 in telstra shares is leaving you overexposed to property?
*them:* (still looking at me like I'm insane), yeah and look at how my telstra shares went- sucked- property never goes down so you can't lose.
*me:*(trying to resist breaking my schooner glass and sticking it in their neck) property does go down, and what if interest rates rise?
*them:* you're an idiot mate- property never goes down- I've never sold a property for a loss, never known anyone who sold for a loss, if interest rates rise I'll just sell one of my properties. I bought one in 2001 for 350,000 so it's gotta be worth 500,000 by now. She'll be right. you're an idiot mate.
*me:*(trying to get them to at least concede something) don't you think that prices will at least stop going up for awhile before another boom hits.
*them:*(in an angry voice) PRICES ALWAYS GO UP. Are you an idiot or something?
*me:* So if they never stop going up, how do young people afford to buy houses then? Do they just hope that one day wages will double?
*them:* The only reason that young people can't afford houses is because they're too lazy to save- off nightclubing, takin those funny pills that rot their brains out. It's their own fault. they should save up for one. You really are an idiot aren't ya mate!
*me:* Yes, I'm an idiot.
end conversation.

Now that I got that off my chest- good post Smurf. Agree. and stuff.  
Think I've been takin too many of those funny pills :nuts:


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## Smurf1976 (14 April 2006)

The sure fire way to get one of these property "it never goes down" experts  to virtually explode is to point out that house prices have _already_ fallen at least in Sydney. Just watch the look on their faces...  

In real estate terminology, I see that petrol prices are improving again. Up to 134.9 now which means the value of the petrol in your car's tank has increased. It would be sensible to buy 10 cars all with a full tank of fuel to take advantage of this since everybody knows that petrol prices never go down. It's good when petrol prices rise since that increases your equity in the tank. You can use this to get yourself into more debt than you ever thought possible. Can't afford fuel? That's your fault - you should have bought a car when you were 10 and used the profits from the petrol in the tank rising in value to buy more cars with more petrol and pyramid the whole thing all on 90% mortgage at variable rates like "smart" people do. Those who haven't bought petrol already have missed the boat and will never fill the tank.  :  :

I see on the news today that US bond yields have topped 5% and crude oil last traded at US$71.00 a barrel.


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## kevo (15 April 2006)

We will have a 10%-15% correction in the US indicies before September. Watch out, everything will go down. The Gold price is telling us something is very wrong, I'm going short the Dow a little. 
www.kontentkonsult.com


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## Smurf1976 (15 April 2006)

Looks like the long feared foreign sell of of US Bonds is happening. And the effects are spreading worldwide. This is confirmation of a significant turning point IMO. http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2006/04/14/cnus14.xml


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## wayneL (15 April 2006)

Smurf1976 said:
			
		

> This is confirmation of a significant turning point IMO.




Agreed. It's going to be a brave new world.


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## RichKid (15 April 2006)

Something to warm the cockles of any bear's heart (chart of exponentially rising US debt and some commentary by Fat Prophets):
http://www.fatprophets.com.au/content.aspx?page=Chart+of+the+month+-+12+Apr+06 and  http://www.fatprophets.com.au/content.aspx?page=Market+Outlook+-+5+Apr+06


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## wayneL (15 April 2006)

Similar story here with Oz bonds:

For your viewing pleasure:







Overstretched RE investors should steel themselves :batman:


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## tech/a (16 April 2006)

> I don't have any grudge against property investors as such. It's just that the absolute arrogance surrounding the property boom, profits from which are gained largely at the expense of ordinary home buyers who simply need somewhere to live, has become VERY irritating to say the least. The real investors running a genuine landlord business won't mind price falls one bit, actually it's a buying opportunity for them, but it seems to be game over for the arrogant "property millionaires" who delight in telling young couples that they should have bought when they were in primary school. Arrogance preceedes a fall...




Usually seen as a quote by people who missed the boat and looked at R/E investors with disgust.Commonly known as the tall poppie syndrome,cant wait to see these rich sons of "B"'s cut down to size.

Game over---good God those that sit back and display condesending arrogance in posts like this NEVER GOT STARTED.

And while the Stock market booms they still bleat about doom and gloom.

R/E investors in the US locked into 30 yr loans at 1.5% I know several with large holdings---think they are worried---not in the least. Interest rates increase less people can own homes so up goes rents as demand for rentals increases.

Investing in R/E,trading in shares are all legitimate methods of wealth creation.
Those that take advantage of opportunity are labelled. Only---- I have found by those who didnt have the guts,forsight,understanding,luck or brains,to take a hold of a once every 12-15 yrs opportunity.

When markets correct both in R/E and the stock market those actively involved take appropriate action,some have been taking risk mitigation action for sometime.

What would the doom and gloomers suggest (other than investing in Gold Bullion) to those wishing to get ahead in these tough times.

Or should we all go slit our wrists?


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## professor_frink (16 April 2006)

tech/a said:
			
		

> Investing in R/E,trading in shares are all legitimate methods of wealth creation.



Very true. The mock conversation I posted earlier isn't far from some real conversations I've had with people I know(i get called an idiot slightly less often in real life). Rather scary I think. I think investing in R/E is a legitimate method of wealth creation, just not the only way, unlike some people I've come across. 
Back to the rates topic, what is sharply rising interest rates going to do to this little commodities boom that we are going through currently?


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## wayneL (16 April 2006)

tech/a said:
			
		

> Usually seen as a quote by people who missed the boat and looked at R/E investors with disgust.Commonly known as the tall poppie syndrome,cant wait to see these rich sons of "B"'s cut down to size.
> 
> Game over---good God those that sit back and display condesending arrogance in posts like this NEVER GOT STARTED.
> 
> ...




Be short on bonds


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## RichKid (16 April 2006)

professor_frink said:
			
		

> ...(i get called an idiot slightly less often in real life). Rather scary I think. ....




Certainly is, just thought I'd play with quoting out of context, like your posts Frinko, very amusing. 

btw, Alan Hull has a new book 'Active Retirement' which looks at using both shares and property in a well rounded investment strategy. Haven't read it but it's the only book by a well respected Aussie pro that I know of which discusses both asset classes in one book.

Anyway, let's get back to topic, there is another thread on property vs shares, from memory.


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## professor_frink (16 April 2006)

richkid,what are you on about? Is there a problem with something I said?


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## Smurf1976 (16 April 2006)

tech/a said:
			
		

> Usually seen as a quote by people who missed the boat and looked at R/E investors with disgust.Commonly known as the tall poppie syndrome,cant wait to see these rich sons of "B"'s cut down to size.
> 
> Game over---good God those that sit back and display condesending arrogance in posts like this NEVER GOT STARTED.
> 
> ...



In any bull market there will be winners and losers. I have no problem whatsoever with those who are genuine winners either through knowledge or good luck. Such people SHOULD be encouraged as it's the risk takers who ultimately underpin economic activity.

I have, however, found that those who are _genuinely_ successful find no need to gloat about their success. They show respect and dignity towards others whilst simply getting on with business. We do not generally see high profile wealthy individuals gloating over their success or telling others that it's their fault for not writing the right software, buying a drilling rig, picking the right lotto numbers or whatever. They find no need for such arrogance.

"Property millionaires" are often very different to this. The simple explanation being that they are not truly wealthy in the first place. They may well have a million Dollars worth of property, but often that is financed by a debt not much smaller than the value of their property. They aren't millionaires at all, at least not by the definition that a millionaire is someone who has a million Dollars in cash of assets _that they own._  We are all subsequently forced to hear repeated spin about how anything which undermines their profits, no matter how good or otherwise it may be for the majority of the population or genuinely productive business, represents a disaster that must be avoided. They come first and to hell with anybody else. That's arrogance to say the least.

Personally, I've done quite well from the commodities boom and in particular oil. It was _very_ obvious for those who did the research that a boom was likely. But I find no need to say to anyone who can't afford petrol at $1.30 a litre that it's their fault for not investing in oil companies. I'm happy to tell them what I believe to be the facts surrounding the situation, something which I have done in this forum, but I see no need to gloat. And I will likewise see no need to rub their noses in it when petrol reaches $2 or even $5 a litre and ordinary working people are seriously struggling as a consequence. But I will still be quite happy to explain the situation to anyone who cares to listen. Likewise I will not complain about the eventual adoption of alternative energy reducing oil company profits. I will simply exit my investments without complaint when it no longer makes sense to hold them. IMO property investors would do well to adopt the same approach.   

Back to the original topic, the global trend towards higher interest rates, the oil and silver situations (and others), the emerging dominance of China, and the renewed push towards non-fossil fuel power all represent real wealth creation opportunities. But let's be graceful in our success without blaming those who have failed to take the appropriate action at this time. It's known as manners and the world could do with more of it IMO.


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## wayneL (16 April 2006)

Some of the comments in this thread really highlight what I have against RE booms. Nobody begrudges a fair return for investment etc. But with houses, we are dealing with a fundamental need in society ...shelter.

When house prices are pushed up through ridiculous and rampant speculation, the sociological impact is negative for society at large. I am seeing lots of evidence of this.. and is being documented, both by scientific process, and anectotally in internet forms and around backyard BBQ's.

The correction will also have negative impacts in the short term, positive in the long term.

It would have been better if sanity had prevailed in the first place


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## RichKid (16 April 2006)

professor_frink said:
			
		

> richkid,what are you on about? Is there a problem with something I said?




No problem at all prof frink. My apologies, I didn't intend to be rude, I was in a silly mood, thought you might have taken it in the humour I intended, looks like I misjudged it. I liked some of the quips in your posts, that's all. sorry!

btw, I think it was my punctuation, I should have used a full stop and then said : "I like your posts frinko". I hope that clears it up.


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## markrmau (16 April 2006)

tech/a said:
			
		

> R/E investors in the US locked into 30 yr loans at 1.5%




I'm a bit confused by this - how did this happen? The yield on 30yr bonds never got much below about 4.1 % Shouldn't this discrepency have been arbitaged out?

http://www.marketwatch.com/tools/qu...avor=basic&origurl=/tools/quotes/intchart.asp

[Note - I'm not doubting that people did get a 30yr loan at low rates as I think I have heard similar stories]


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## professor_frink (17 April 2006)

RichKid said:
			
		

> No problem at all prof frink. My apologies, I didn't intend to be rude, I was in a silly mood, thought you might have taken it in the humour I intended, looks like I misjudged it. I liked some of the quips in your posts, that's all. sorry!
> 
> btw, I think it was my punctuation, I should have used a full stop and then said : "I like your posts frinko". I hope that clears it up.




Not a problem RichKid. Have a good day mate


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## noirua (17 April 2006)

Smurf1976 said:
			
		

> My basic view is that _something_ in the economy will "break" and until that happens, US short term interest rates will keep rising or at least not fall. That's just based on history. Knowing what that something that breaks will be is the hard bit.
> 
> Just to raise another possibility (I'm not saying it's likely) but it's possible that oil and other commodity prices could move in different directions. A major oil shock (for whatever reason) would send the oil price to the moon but the resultant economic slowdown (physical oil consumption would have to fall due to lack of short term supply at _any_ price which implies a slowing overall economy) would cut demand for commodities in general. So oil up whilst other commodities (with the possible exception of energy commodities) fall. It's possible IMO but whether or not it's likely is another matter. The ongoing tensions in Iran is my underlying thinking here.




It does seem only a matter of time before the US makes a strike against Iran. The first may not be a decisive strike as they wait for a reaction, not only from Iran but importantly from China and Russia.


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## wayneL (26 April 2006)

International bond markets hitting new lows:

http://today.reuters.co.uk/investin..._RTRIDST_0_MARKETS-BRITAIN-GILTS-UPDATE-5.XML




> UK gilts pounded by strong data, rate hike bets
> Tue Apr 25, 2006 5:17 PM BST
> Printer Friendly  |  Email Article  |  RSS
> (Page 1 of 2)
> ...




US Bonds taking out lows as well.

Like I said earlier, overcommitted property  investors should steel themselves :


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## wayneL (27 April 2006)

New lows again today... and starting to get the attention of the press...

http://money.cnn.com/2006/04/26/markets/bondcenter/bonds/index.htm?section=money_markets

1







> 0-year yield hits multi-year high
> Treasury prices stumble on surprisingly strong durable goods orders, pushing benchmark yield to highest level since May '02; dollar gains.
> April 26, 2006: 9:34 AM EDT
> 
> ...


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## wayneL (27 April 2006)

China raises rates

http://yahoo.reuters.com/stocks/Quo...04-27_11-11-55_L27093917&symbol=.FTEU3&rpc=44

Economies like the UK and Australia will not be able to swim upstream against the direction of world interest rates, which is up! This of course will be catastrophic for lots of folk, but a gigantic opportunity for others. Mortgagee sales coming to a suburb near you  

Liquidity is King!  



> GLOBAL MARKETS-Shares fall, yen yo-yos as China ups rates
> Thu Apr 27, 2006 7:11 AM ET
> 
> (updates after China rate rise announcement)
> ...


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## wayneL (29 April 2006)

Rates pressure building
From: AAP

April 28, 2006


THE case for an interest rate hike is building and while a move as early as next week can't be ruled out, most economists don't expect the central bank to act that soon.
The Reserve Bank of Australia (RBA) meets next Tuesday to vote on whether to alter the official rate, which has held at 5.50 per cent since March last year.

Most economists expect rates will remain unchanged following the meeting.

But the recent run of economic data has led some to revise up the chance of a hike in coming months, particularly after new inflation figures suggested an acceleration in prices down the track.

The speculation came as the Housing Industry Association (HIA) released new home sales figures showing that sales of new houses and multi-unit dwellings, or apartments, grew by 5.2 per cent in March to 10,114 dwellings.

HIA's chief economist Harley Dale said the March figures were a positive sign that the current slowdown in housing activity was on track to finish in late 2006/07. "New home sales were looking relatively weak in the first quarter of last year and it is a positive development that sales levels are higher in the March quarter this year," Mr Dale said.

Advertisement:
But he warned new home sales would only pick up to the high levels of a few years ago if there was no change in the official interest rate, which has held at 5.50 per cent since March last year.

"New home sales are clearly recovering from a weak 2004/05, but you can forget about a continuation of that trend if households have to endure another interest rate rise," he said.

Of 13 economists surveyed by AAP, just four said the central bank would raise rates next week, one believed there would be no move until the June quarter while three see the December quarter as a more likely time for a hike.

The results compared with AAP's previous monthly survey which found no economists expected a near-term change and only one believed rates would rise sometime in the second half of 2006.

Macquarie Bank chief economist Richard Gibbs, who does not expect a hike next week, said unlike recent past RBA meetings, its decision next week is not a done deal.

"It's not an open and shut case and therefore it is an issue of policy action that will be discussed fully next Tuesday," Mr Gibbs said.

"I don't think you can say it's a closed decision at this point in time."

But Grange Securities director of research Stephen Roberts, who does expect a hike next week, says the pieces needed to build a case for an rise have come together in the past few weeks.

"We've got evidence of inflation already out of what was occurring in late 2005 and the first part of 2006," Mr Roberts said.

"And with strengthening growth and an added tail wind from overseas, I can't see that they've got much choice but to lead into that with an interest rate increase."

Inflation data released this week showed the consumer price index rose by a stronger-than-expected 0.9 per cent in the March quarter and three per cent annually.

But the core measure of inflation, which excludes volatile items such as fuel, rose only 0.3 per cent in the quarter and 1.7 per cent in the year.

Just what this says about the outlook for inflation this year - a crucial factor in the RBA's decision making - remains a point of contention.

The RBA maintains a headline inflation comfort zone of two to three per cent annually.

For some, the weak core measure in the March quarter suggests a sharp upward correction in coming quarters. But others remain confident the recent surge in the oil price, which has impacted headline inflation, has so far only had a muted effect on consumer prices.

JP Morgan chief economist Stephen Walters expects the RBA to lift rates in the June quarter.

"While a rate hike next week is possible, there is a strong case for the RBA waiting another month and tightening policy in June," Mr Walters said.

"Waiting the extra month allows RBA officials to track the path of oil prices and to see the contents of the budget and the next round of consumer confidence and retail spending reports to see how the battlers are coping with soaring fuel prices."


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## wayneL (23 June 2006)

New low in US treasuries...pricing in more interest rate hikes.

Cheers


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## RichKid (25 June 2006)

Here's a recent statistical view on the inverted yield curve: http://www.tradingeducation.com/blackman_pmd.asp


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## scsl (26 June 2006)

it's almost certain that a 25bp rate rise in the US early morning (our time) on Friday will be announced. although there is talk of a 50bp rise, don't bank on it...

_"When there are very clear signs the economy is slowing, the stock market is soggy and the 10-year Treasury (yield) is at 5.20 percent, to pick up a hammer and hit the economy in the head with 50 basis points? That to me is not likely at all," said former Fed Governor Lyle Gramley._


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## RichKid (20 August 2006)

Check out this article about how Uncle Sam is apparently pulling the wool over everyone's eyes, should the focus be on inflation or growth: http://www.kitco.com/ind/Schiff/aug182006.html


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## markrmau (18 October 2006)

Well the story of the imminent collapse of the USD has been doing the rounds for the past 3-4 years, but it just hasn't happened. Maybe it will catch everyone unawares....

http://www.smh.com.au/news/business...y-us-withdrawal/2006/10/17/1160850931319.html

'Central banks in China, Japan, Taiwan, South Korea and Hong Kong have channelled immense foreign reserves into American government bonds, helping to prop up the US dollar and hold down American interest rates.

Mr Costello said "the strategy had changed" and Chinese central bankers were now looking for alternative investments.


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## noirua (27 November 2008)

I still retain half of my US Treasuries having sold the rest in the last 4 weeks. Interest rates are set to go lower in the USA and the US Dollar remains strong.


Have you voted yet at compareshares and if not, there's a chance in the next 8 days at http://www.thebull.com.au/the_stockies/forums.html


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## sinner (27 November 2008)

IMO we are setting up for a huuuuuge JPY rally.

Sooner or later (my guess is sooner) the floor will fall out from underneath the USD and it will drop like a rock. This (again, IMHO) will trigger the beginning of the end for the tightly wound yen carry trade, causing unprecedented demand for JPY (for essentially the same reasons), unlike even the current demand for USD.


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## noirua (27 November 2008)

sinner said:


> IMO we are setting up for a huuuuuge JPY rally.
> 
> Sooner or later (my guess is sooner) the floor will fall out from underneath the USD and it will drop like a rock. This (again, IMHO) will trigger the beginning of the end for the tightly wound yen carry trade, causing unprecedented demand for JPY (for essentially the same reasons), unlike even the current demand for USD.



Hi sinner, When you say Japan rally, do you mean interest rates there will go up as they cannot fall much, or do you mean the currency will strengthen. The Yen looks very strong already.

*Don't forget*: Voting continues at the link below and Aussie Stock Forums very much needs you.
http://www.thebull.com.au/the_stockies/forums.html


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## noirua (9 February 2021)

Yield on 30-year Treasury Hits 2% for First Time Since Pandemic
					

Yield on 30-year Treasury Hits 2% for First Time Since Pandemic



					uk.advfn.com
				



The 30-year yield has breached a key technical level, "which now opens the way towards [a range of] 2.44% to 2.47%," Citigroup Inc. analysts wrote in a research report. "We expect the yield move can extend in the medium-term."


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## noirua (27 January 2022)

Fed signals interest rate hike could come 'soon' as inflation rages
					

The Federal Reserve on Wednesday signaled plans for its first interest rate hike in three years, paving the way for a March liftoff as policymakers seek to keep prices under control and combat the hottest inflation in nearly four decades.




					www.foxbusiness.com


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## wayneL (3 May 2022)

US ten year yield now has a 3 in front of it with no real sign of any sort of bottom in bond prices.

That is still a very low figure considering the rate of inflation and I am of the opinion that Bonds will undergo some sort of a meltdown at some point when the vigilantes finally get the shyts with everything. FWIW


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