What don't these people understand? Foreign central banks need to buy dollars. They need to support the dollar in order to keep their currencies from rising in value, too much. They need to maintain favorable exchange ratios.
What about inflation? Why would they buy the 10-year of inflation may be on the rise? They bought the 10-year as a way to combat inflation. Say what?
That's right. Most inflation has been in commodities and energy. These are denominated in dollars. By purchasing treasuries, the dollar is strengthened and that to have a deflationary effect on commodity prices. Mark my words, the 10-year note will need at least all of 2011 to get to 4.00% and it may take more than one year for both Fed Funds and three-month LIBOR to get past 2.50%. Rates are not poised to explode higher.
No comments:
Post a Comment