In the last couple days who said “The U.S. dollar is not in a spectacular position, let’s be frank, and its prospects cause various questions as do the prospects for the global currency system.”? And also told CNBC, “We need some kind of universal means of payment, which could create the basis of a future international financial system. . . Naturally, because of the crisis in the American economy, attitude to the dollar has also changed.” Would you believe . . . Russian President Dmitry Medvedev? Questioning OUR currency? And what cred does he have given the dismal performance of the Russian economy? Oh, yeah, and if that’s not enough he eats borscht and probably is really some sort of KGB spy . . .

The May 24th Telegraph, U.S. Bonds Sale Faces Market Resistance:

It is not clear where the capital will come from to cover global bond issues. Asian central banks and Mid-East oil exporters have cut back on their purchases of US and European bonds as reserve accumulation slows. Russia has slashed its holding by a third to support growth at home. Even Japan’s state pension fund has become a net seller of bonds for the first time this year the country’s population ages.

Japan’s public debt will reach 200pc of GDP next year. Warnings by the Japan’s DPJ opposition party that, if elected this autumn, it would not purchase any more US debt unless issued in yen, is a sign that the political mood in Asia is turning hostile to US policy.

China drives copper, Posted by Izabella Kaminska on Apr 29 12:26 “So why is China buying all that copper? Well there has been restocking by fabricators but, according to Standard Chartered, a substantial part of total imports to China, some 350kt out of 748kt, is actually being bought by the State Reserve Bureau (SRB). This supports some theories out there that China is attempting to diversify its reserves in ever more original ways.”In February, China bought Treasuries. $4.64b by my count. It bought $5.61b of bills, while reducing its long-term Treasury holdings by $0.96 billion.

Hard money enthusiasts have long watched for signs that China is switching its foreign reserves from US Treasury bonds into gold bullion. They may have been eyeing the wrong metal.

China’s State Reserves Bureau (SRB) has instead been buying copper and other industrial metals over recent months on a scale that appears to go beyond the usual rebuilding of stocks for commercial reasons.

Nobu Su, head of Taiwan’s TMT group, which ships commodities to China, said Beijing is trying to extricate itself from dollar dependency as fast as it can.

. . .

The SRB has also been accumulating aluminium, zinc, nickel, and rarer metals such as titanium, indium (thin-film technology), rhodium (catalytic converters) and praseodymium (glass).

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/5160120/A-Copper-Standard-for-the-worlds-currency-system.html
A Copper Standard for the World’s Currency System Ambrose Evans-Pritchard

“China has woken up. The West is a black hole with all this money being printed. The Chinese are buying raw materials because it is a much better way to use their $1.9 trillion of reserves. They get ten times the impact, and can cover their infrastructure for 50 years.”

a blurring of the line between fiscal and monetary policy

Daily Treasury Yield Curve

And for January 2 to May 29, 2009you can access the data here. You’ll see that the 10 year note was substantially under 3.5% for most of the year until May 21st, just two weeks ago, and broke convincingly over 3% a few weeks before that. Overall, it’s up about 1% since the Fed announced its quantitative easing program in March.

At Accrued Interest, in the heyday of September 2006: “First, junk is not like the boring old corporate bonds I’m more involved with. If you take two high quality corporate names in similar industries, like Bear Stearns and Lehman Brothers, they are going to tend to move together. That’s because almost all investment grade companies are in good financial shape, the probability of default is remote. If Lehman Brothers misses earnings by 5 cents, it doesn’t really change anything about their credit worthiness. It would take a either severe turn of fortune or a very sustained period of poor performance to take down a company like Lehman. So bonds tend to move day to day on the general market appetite for corporate risk, and less on anything company specific.”

Who would take up the slack? Japan? Great Britain? The Fed. through monetizing. And then?

And Japan: ¥725 billion trade deficit first red ink in 28 years

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