Comments on: The Dollar Gets Weaker, Bond Yields Fall? http://wallstreetpit.com/11560-the-dollar-gets-weaker-bond-yields-fall Wed, 08 Feb 2012 22:13:42 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Deon http://wallstreetpit.com/11560-the-dollar-gets-weaker-bond-yields-fall#comment-74359 Deon Tue, 27 Oct 2009 14:51:24 +0000 http://wallstreetpit.com/?p=11560#comment-74359 Really good assessment on yield conundrum. However, bad debt would need to be written down (by way of BK's and liquidations) prior to rates moving up. This is because banks do not want to lend due to high debt loads and would continue buying bonds and thereby pushing or keeping rate low. In addition, the fed also participates in the purchase of long term bonds in efforts to encourage more borrowing (this is like trying to force feed more debt in an already debt saturated system) and thereby you have a bond bubble just waiting to crash. Also, the current run up in equities can be contributed to this due to liquidity desperately searching for higher rates of return and currency depreciation (both due to the lower yields). Dollar strength may be an indicator of a change in the tide, at least temporarily. The issue remains that bad debt MUST be written off on a large scale prior to recovery. Really good assessment on yield conundrum. However, bad debt would need to be written down (by way of BK’s and liquidations) prior to rates moving up. This is because banks do not want to lend due to high debt loads and would continue buying bonds and thereby pushing or keeping rate low. In addition, the fed also participates in the purchase of long term bonds in efforts to encourage more borrowing (this is like trying to force feed more debt in an already debt saturated system) and thereby you have a bond bubble just waiting to crash.

Also, the current run up in equities can be contributed to this due to liquidity desperately searching for higher rates of return and currency depreciation (both due to the lower yields). Dollar strength may be an indicator of a change in the tide, at least temporarily. The issue remains that bad debt MUST be written off on a large scale prior to recovery.

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