Tag: bonds

Why Japan isn’t broke yet

Posted on by Lone Candle

Japan has lots of assets like a massive sovereign wealth fund. When you subtract these assets from their debts, their debt to GDP ratio is 77%, which isn’t that high.

Japan takes money from its people in the form of taxes and then invests in assets like US treasury bonds. Because their currency depreciated over time, their debt has become worth less, while their foreign assets have become worth more.

This has benefited Japan a lot, but may backfire if the Yen goes up, foreign interest rates lower, or Japanese interest rates rise. If Japan has inflation, this could force them to raise interest rates or live with inflation.

https://www.youtube.com/watch?v=hLwSSGM6tzc

$69 Billion Bond Auction – Why Yields are Up Since the Fed Cut Rates (A Warning)

Posted on by Lone Candle

Long term bond yields rose after the Fed cut. This is the bond market signaling to the Fed that the interest rate cut was not needed and that they have less confidence that the U.S. will remain solvent in the long term. We should watch and see if this signal maintains over the weeks to come.

https://www.youtube.com/watch?v=Yr6pBTKg1VY