Japanese, Russians Playing Games with Bonds and Reserve Currencies

Less than one month ago, a Pravda report on Russian foreign holdings stated, “about 47.5 percent of the currency assets of the Russian Central Bank were based on the euro, whereas the dollar-based assets made up 41.5 percent as of the beginning of the current year. The situation was totally different at the beginning of the previous year: 47 percent of investments were made in US dollars, while the euro investments were evaluated at 42 percent.” (See Russia Dumps the U.S. Dollar for Euro as Reserve Currency).

Since that report Russia has been talking non-stop about replacing the Dollar as the Reserve Currency… Just on June the 10th Bloomberg reported that Russia May Swap Some U.S. Treasuries for IMF Debt.

Today the tune from the Russians abruptly changed:

Treasuries Rise After Russia Says It Has Confidence in Dollar

By Wes Goodman and Theresa Barraclough

June 15 (Bloomberg) — Treasuries rose for a third day after Russian Finance Minister Alexei Kudrin said his nation has confidence in the dollar and there are no immediate plans to switch to a new reserve currency.

Ten-year notes extended their winning streak to the longest in a month on speculation a U.S. government report will show overseas demand for the nation’s assets increased in April. Kudrin’s comments came after Japanese Finance Minister Kaoru Yosano said his government is confident about the outlook for U.S. Treasuries, helping attract investors after 10-year yields climbed to the highest level in seven months.

“Overseas investors feel the current level is not bad,” said Kazuaki Oh’e, a debt salesman in Tokyo at Canadian Imperial Bank of Commerce, the nation’s fifth-biggest bank. “We’ll see some buying.”

Investors from outside the U.S. bought $57.5 billion more of the nation’s long-term bonds, notes and stocks than they sold in April, according to a Bloomberg News survey of economists before the Treasury Department issues the figures today. It would be a third straight month of net purchases… continue reading »

Wow, investors bought $57 billion in April? That’s funny because we had to sell “only” $150 billion last WEEK!

And here’s the “unshakable” article:

Yosano Says Japan’s Trust in Treasuries ‘Unshakable’

June 12 (Bloomberg) — Japanese Finance Minister Kaoru Yosano said his government is confident about the outlook for U.S. Treasuries, signaling the second-biggest foreign holder of the securities will keep buying them amid record sales.

We have complete trust in the fact that the U.S. views its strong-dollar policy as fundamental,” Yosano, 70, said in an interview in Tokyo on June 10 before attending a Group of Eight meeting of finance ministers starting today in Italy. “So our trust in U.S. Treasuries is absolutely unshakable.”

China and Russia, the largest and third-largest single holders of the debt, have said they may switch some of their reserves out of Treasuries, and economist Nouriel Roubini said yesterday the dollar won’t always be the world’s reserve currency. Treasury yields fell today after Yosano’s remarks, retreating from a seven-month high.

“Japan is, of course, mindful that selling Treasuries will cause the yen to strengthen and that would hurt corporate profits,” said Chotaro Morita, chief strategist in Tokyo at Barclays Capital Japan Ltd. in Tokyo. “Even with their strong ties, it’s possible Japan would consider selling U.S. Treasuries should the dollar say, halve in value.”

I have never heard so much baloney in all my life!

So, we have bonds that have been crashing while we issue more and more debt. Only a fraction of that debt is being sold, and when it is, it is now at higher and higher interest rates.

Now, if you held a bunch of our debt, what would you say if you saw a bond market CRASH in progress?

Uh, HUH… that’s what I thought.

Let me decode what the Japanese are saying for you… “Oh SHIT! We must get rid of some of our dollar denominated debt PRONTO! Quick, let’s stuff those secret bearer bonds in a briefcase and ship them around the world to be sold in pieces. While we do that we’ll put out a press release stating we have “unwavering” confidence in the dollar so that maybe some poor idiot sap will buy them from us!”

See, and I’ll bet you didn’t think I could translate Japanese!

Guess what, I can also translate Russian! “Now that the world knows that we own more Euros than Dollars and we are calling for a new reserve currency, the bond market is crashing, the dollar is losing value and so are our remaining dollar denominated assets! We’ll keep selling the dollar, but tell the world we have “complete confidence in the Dollar” so that we may sell our remaining dollar assets to the poor suckers who are stupid enough to believe a word we say!”

And thus the dollar rises slightly, bonds rise slightly, but equities are down in overnight futures trading.

These comments are nothing but DESPERATE GAME PLAYING and MANIPULATION by governments. This type of activity has always been around, but it never succeeds. I have never seen so much BULL flying in such a short time period. This tells me that the bull excrement is already hitting the fan. In short, the markets have got them under pressure.

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About Nathan A. Martin 121 Articles

Nathan A. Martin is President of Wingman Investments, LLC, and author of the book Flight to Financial Freedom – Fasten Your Finances. He sees people, both young and old, facing a new era where they are forced to be responsible for their own financial success or failure. His message is clear; become financially literate or be a victim of the external forces that are impacting everyone. Nathan possesses an undergraduate degree in Professional Aviation and Business as well as a Master’s degree in Aviation Management and Operations.

A former Air Force and retired airline pilot, his flying took him the world over participating in many operations including the invasion of Panama, and combat time during Operation Desert Storm. Experience has come over 26 years of flight - logging more than 12,000 flight hours both civilian and military, and as the owner of a corporate aviation management company whose focus was aircraft efficiency.

Influenced by his parents entrepreneurial activities, Nathan began his business and investment training early in life and has used that knowledge every step along the way... from business school to his own corporations and personal investments.

Visit: Nathan's Economic Edge

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