If rebuilding Christchurch will cost more than 10 billion how much the cost
of reconstruction for Japan in the aftermath of the Tsunami is going to be like?
It could easily amount to trillions of USD.
I wish Japan well and won't want to profit from its misery. But perhaps it is
time to increase my holding of gold bullions for extra protection against
further deterioration of the USD.
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http://www.examiner.com/finance-exa...-to-pay-for-rebuilding-costs-from-the-tsunami
Kenneth Schortgen Jr
March 11th, 2011
Japan could be the next economy to dump treasuries in light of the cost
required to rebuild after the tsunami that tore through the Northern part
of their country today. As bond insurer Pimco lead the way earlier this
week in selling off all their bond holdings, Japan will need to find an
income source to help rebuild its infrastructure, and get its economic
machine going again.
According to the Treasury Department, Japan is the second biggest holder
of government debt (actually third largest since the Treasury doesn't
record the debt instruments held by our Federal Reserve), and they have
nearly $900 Billion in dollar reserves. This gives Japan a large source
of funds to begin rebuilding, but it also comes at a price.
Depending upon how many Treasuries Japan has in reserve should they choose
to dump into the market, it could lead not only to bond prices dropping,
but it also may trigger other nations such as China to immediately
jump in and sell their holdings, causing a crash in the bond markets,
and bringing serious damage to our economy.
In an article this morning from Reuters, bond prices are already dropping
in the fear that Japan may sell off its holdings to pay for rebuilding
the country.
The benchmark 10-year note US10YT=RR was down 5/32 in price to yield
3.38 percent, up from 3.36 percent on Thursday. The yield is down
from a high of 3.60 percent on March 4.
Analysts at Credit Suisse also said on Friday that they have closed
their long 10-year note recommendation after reaching their target
yield level.
Some investors, meanwhile, feared that Japan's earthquake may
pressure bonds if insurers need to sell high-quality holdings to
pay for claims.
Yields on 10-year Treasuries rose by around 20 basis points in the
days following the earthquake in Japan's Kobe region in 1995.
"The last time there was a large earthquake, Japanese investors
sold things to repatriate and thus the market came off a bit," David
Ader, head of government bond strategy at CRT Capital in Stamford,
Connecticut, said in a note.
The global market today is so intertwined that a single incident in one
country can trigger economic turmoil in many others. We have seen this
over the past two weeks in the Middle East over oil, and now with the
earthquake and tsunami in Japan, we could see the bond markets go into
chaos here in the US.
Japan has a track record of dumping their treasuries after large disasters
to protect and rebuild their country, and with the tsunami that hit the
mainland today, the likelihood of this happening is very good, and could
bring strong influence to the economy of the US as well.
of reconstruction for Japan in the aftermath of the Tsunami is going to be like?
It could easily amount to trillions of USD.
I wish Japan well and won't want to profit from its misery. But perhaps it is
time to increase my holding of gold bullions for extra protection against
further deterioration of the USD.
-----------------------------------------------------------------------------------------------------------------------------------
http://www.examiner.com/finance-exa...-to-pay-for-rebuilding-costs-from-the-tsunami
Kenneth Schortgen Jr
March 11th, 2011
Japan could be the next economy to dump treasuries in light of the cost
required to rebuild after the tsunami that tore through the Northern part
of their country today. As bond insurer Pimco lead the way earlier this
week in selling off all their bond holdings, Japan will need to find an
income source to help rebuild its infrastructure, and get its economic
machine going again.
According to the Treasury Department, Japan is the second biggest holder
of government debt (actually third largest since the Treasury doesn't
record the debt instruments held by our Federal Reserve), and they have
nearly $900 Billion in dollar reserves. This gives Japan a large source
of funds to begin rebuilding, but it also comes at a price.
Depending upon how many Treasuries Japan has in reserve should they choose
to dump into the market, it could lead not only to bond prices dropping,
but it also may trigger other nations such as China to immediately
jump in and sell their holdings, causing a crash in the bond markets,
and bringing serious damage to our economy.
In an article this morning from Reuters, bond prices are already dropping
in the fear that Japan may sell off its holdings to pay for rebuilding
the country.
The benchmark 10-year note US10YT=RR was down 5/32 in price to yield
3.38 percent, up from 3.36 percent on Thursday. The yield is down
from a high of 3.60 percent on March 4.
Analysts at Credit Suisse also said on Friday that they have closed
their long 10-year note recommendation after reaching their target
yield level.
Some investors, meanwhile, feared that Japan's earthquake may
pressure bonds if insurers need to sell high-quality holdings to
pay for claims.
Yields on 10-year Treasuries rose by around 20 basis points in the
days following the earthquake in Japan's Kobe region in 1995.
"The last time there was a large earthquake, Japanese investors
sold things to repatriate and thus the market came off a bit," David
Ader, head of government bond strategy at CRT Capital in Stamford,
Connecticut, said in a note.
The global market today is so intertwined that a single incident in one
country can trigger economic turmoil in many others. We have seen this
over the past two weeks in the Middle East over oil, and now with the
earthquake and tsunami in Japan, we could see the bond markets go into
chaos here in the US.
Japan has a track record of dumping their treasuries after large disasters
to protect and rebuild their country, and with the tsunami that hit the
mainland today, the likelihood of this happening is very good, and could
bring strong influence to the economy of the US as well.