Chronicles Of Depression 2.0: #070

Eurasia begins to awaken …

Dollar Slide Drives Budget as Japan Shuns Treasuries (Update2)

April 28 (Bloomberg) — Add another ailment to the U.S. misery index of soaring gasoline and wheat costs and falling home values: a federal deficit that is burgeoning as foreign investors led by the Japanese recoil from the slumping dollar.

The Japanese, who own $586.6 billion, or 12 percent of U.S. government debt, had their worst quarter in Treasuries this decade, losing 7 percent in the first three months of the year as the dollar fell to the lowest since 1995 versus the yen, Merrill Lynch & Co. indexes show. Dai-ichi Mutual Life Insurance Co., Meiji Yasuda Life Insurance Co. and Sumitomo Life Insurance Co., three of the nation’s four-biggest insurers, would rather accept the world’s lowest bond yields in Japan than buy U.S. debt.

Emphasis added by me.


Japan owns more Treasuries than any other nation. After raising their holdings by $9.2 billion to $620.6 billion between March and July 2007, Japanese investors trimmed that stake by $34 billion through February, the Treasury said April 15.

America relies on foreign investors, who own more than half the U.S. government debt outstanding, to finance a deficit that New York-based Goldman Sachs Group Inc. predicts will expand to a record $500 billion for the year ending Sept. 30, after a $163 billion gap last year. Without their support, long-term interest rates would be 0.9 percentage point higher, a 2006 Federal Reserve study found.

Emphasis added by me.


A survey of Japanese funds investing overseas found 58 percent favor euro-denominated bonds, up from 20 percent a year ago, Barclays Capital Japan Ltd., a unit of the world’s fifth- biggest currency trader, said in an April 24 report. Kokusai cut its U.S. fixed income holdings to a record-low 20 percent in March, from 32 percent two years ago.

Emphasis added by me.

Click …

“The dollar’s primacy in the international financial system is being eroded,’‘ said Rogoff, a professor at Harvard University in Cambridge, Massachusetts. “Foreign investors have done very poorly in U.S. Treasuries.”

Emphasis added by me.

… bang!

Explore posts in the same categories: C.O.A.T. - Money, Depression 2.0

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