As I glanced idly at the charts this afternoon, I noticed that the June US T-Bond future had jumped by a full point in a few minutes when the session opened (that's at 7.20 am Central Time, I think), and on the assumption that UK and US bond prices move in line, I thought it best to bail out of my short position of one UK Long Gilt future. The price then fell back again. When I had another look this evening I noticed that the T-Bond future had jumped by a full seven points (although it's dropped back a bit since), which is quite staggering, this is a once-every-few-years event, see chart:
It turns out that the economic illiterates who run the US had decided to go for the same tactic as the morons in the UK, i.e. for one branch of government (the central bank) to print money to buy bonds issued by another branch (the Treasury). What is interesting is that when the UK government decided to print/spend between £75 and £150 billion, UK gilt prices jumped five points, and the US has committed to print/spend $1.2 trillion, if you scale that down for exchange rate and different sizes of economy that's about the same as the upper end of what the UK will print/spend, and the impact on US bond prices was pretty much the same.
CityUnslicker looks at the corresponding effect on the price of gold. USD fell slightly as well, this is all textbook stuff.
Bond
47 minutes ago
1 comments:
It's "funny"* that what the economy needs is a higher yield, and the elimination of negative yields, and the government is doing exactly the opposite, lowering yields to keep unproductive businesses in place.
I think a Jar Jar Binks quote is apt "Wesa gonna die!"
* Apart from the people who will die or have s their lives ruined.
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