PKT message, Came across this - interesting watch the bond markets

Good Folks:

I have been a lurker, but a situation is setting up that I want to draw everybodys attention to.

When the heavy currency interventions started in the fall, I noticed that the bonds would rally every time the dollar got hammered. This inverted the normal relationship where US bonds should sell off when the dollar sells off. Heck, even Sinclair himself ( I think around Sept) was buying bond puts figuring the dollar fall would start the collapse of the US debt bubble. But it didn't happen, and bonds pulled off a completely unexpected rally in the face of an improving economy.

Well, we all now know why. The Japanese, Chinese, et. al. were issuing debt (bonds) in their own currency, taking the cash proceeds, selling the proceeds (their own currency), buying dollars, and with those dollars buying US treasuries, Agency bonds, and who knows what else (could they be buying up the stock market too).

Well come December of 2003 and the news stories started hitting about size of the monthly BOJ currency operations and the Japanese Ministry of Finance increasing their own foreign currency holding limits to some unbelievably huge number of trillions of Yen for 2004 to further facilitate the USD currency operations(with the requisite Japanese Gov Bond issuance to finance the whole thing).

I had to say to myself "what idiots would buy Japanese Government bonds (JGB's) at almost zero yield", and thus give the BOJ the ammo to fight with. I pulled up the JGB chart fully expecting to see the bond selling off in the face of such huge additional issuance (300+ Billion USD worth of additional JGB's issued that the market was not expecting) .... and what I saw totally confounded me. The JGB bonds were not selling off, but were in fact rallying to new intermediate term highs!

As I researched the JGB market I found that almost all advisors (Dawa Securities, Mizho Securities, etc.)were calling for increased demand for JGB's, which totally confounded me. I couldn't understand why with such huge issuance, with such a risky and nontraditional Central bank ploy, junk-bond status, why would Japanese citizens, banks, corporations, and foreign investors buy this junk paper yielding almost nothing. (Japanese government debt was downgraded to below junk status in Spring of 2003 by Moodys and Fitch.)

http://gabeharris.com/JapanBotswana.html

I was totally confounded why the JGB continued to rally, and in fact broke out to the upside while the massive currency interventions were going on. Japan had to issue over 200 Billion USD worth of JGB's in 2003 and well over 100 Billion USD worth so far this year just for currency intervention alone.

Well, I finally arrived at the answer. It seems the reason that Japanese buy the JGB is that their banks are insolvent, and with greatly reduced government deposit insurance, large holders of cash have nowhere else to go for safety.

So I have been monitoring the JGB chart to see if/when it breaks out to the downside. This would put a huge crimp in the Japanese Ministry of Finance currency operation (very similar to the carry trade sell JGB's yielding almost zero and buy US treasuries yielding 2% - 5% depending on maturity).

http://customer1.barchart.com/custom/alaron/4015.htm

As you can see from the chart the JGB has broken out to the downside. Five days in a row down which is unprecidented in recent times.

Well, yesterday I also looked at long term government bonds of most of the other economically important nations like Britain, Euroland, Germany, United States, etc. (Bund, Shaatz, EuroBond, US Treasury, etc.).

... and guess what?

They are all sitting on their lower uptrend line and are one down day away from also breaking out to the downside.

So it looks like in spite of what anybody is saying about lowering rates anywhere in the world, the bond markets are smelling the rat, and rates may be ready to rise on a world wide basis.

You could just about overlay the bond charts of any major currency nation on top of each other and they would match. It is uncanny but makes sense all of the world's bond markets are linked together, where the carry trade of borrowing where rates are low and lending where rates are high (could this be the reason for the huge amount of financial derivatives at JPM, Citibank, hooligans, et. al.) Rates are gonna rise, but it looks like they are going to rise for all countries simultaneously. Looks like the end game in rates/currency is about to start.

The holders of debt worldwide are fixing to be in a world of hurt if the US, British, German, Euro, etc bonds confirm the Japanese JGB breakout to the downside.

MONITOR THIS SITUATION MY DEAR FRIENDS.

There is no coincidence that the CRB is rallying and the PPI hasn't been released while all of this is setting up. Could this be the start of the worldwide debt meltdown?