Treasuries in the EU
ʘ ʘ ʘ Updated november 2, 2011
The 2009 Bond crash unfolding in stages....or how to loose 75% of your savings in 6 months time.
This kind of situation is extremely dangerous and explains why the USA is doing all it can to keep consumption going....
Despite loss of its triple A rating and central government debt in excess of 200pc of GDP, Japan continues to enjoy the lowest sovereign bond yields anywhere in the world.
This apparent paradox is explained by the fact that when there is generalized risk aversion, where consumers are reluctant to spend and companies won't invest, the consequent savings surplus tends to flow into the only place it can – government debt.
Some of the same phenomenon is occurring in the US right now. Much as China threatens to withdraw its support for the US dollar in protest at policies which it thinks debase the currency, it really has no option but to continue buying US Treasuries as long as it maintains such a big trade surplus with the US. The capital surplus is merely the mirror image of the trade surplus.
Updated July 1, 2011 - Euro Yields, Gilts and Government bonds
Warning: Holding on to Government bonds is hazardous to your financial health. Long term Greek government bonds crashed and yield rose to +10% in only a week's time. Yield on Portuguese bonds rose to +5%...only in days time....Those holding on the Government bonds will loose 50% to 90% of their savings!!!!