Treasuries

My Treasury holdings are making me nervous. The 30-year is almost back to where it was when Bernanke announced his collosal money printing plan. It seems to have only been a speedbump in the selloff.

Another worrying sign is the failure of the United Kingdom's 40 year bond auction. They failed to sell the whole amount. The price can still be held down at any particular auction, by not accepting low bids. However, liquidity will dry up and the market will shrink. This is not to say that the U.S. is the U.K., but it is experiential evidence that quantitative easing is a cure-all for enormous supplies of government bonds.

Treasuries did, however, rally into yesterday's stock market downturn. This makes me suspect that some of the Treasury weakness is due to the market upturn encouraging risk-taking activity. However, I've noticed that when the market is down, Treasuries go up, but not as much as they go down when the market is up.

Part of me says, "take the loss and get rid of the risk." The other part says that this is just risk taking activity, be patient, and wait for the employment report (better known as the UNemployment report) on April 3rd. I think I will do this.

I was seriously considering trying to short the Japanese Yen today. Their economy is in a huge tailspin, with exports down a record 49.4% over February of last year. However, FXY is hard to borrow. Japanese government debt, unlike U.S. debt, is mostly held internally. However, my thinking is that without a sizeable trade surplus, they will be unable to finance their fiscal deficit, which is 1.70 times GDP. It's not foreign owned, as U.S. debt is. If they had to borrow from foreigners, they would have to pay higher interest rates, and the Yen would plunge. I guess I will keep an eye on this and if I want to do it in the future, I'll have to short the Nikkei index, or come up with some other creative solution.