ha – operation twist

Bernanke has decided to continue with operation twist, and continue to subsidize those folks on the long bond..


Surprisingly, deflation hit the streets.  The long bond went up, commodities/oil down, and same with equities.  The dollar also strengthened against both the euro and yen.

Can investors afford to ever leave the treasuries as long as Ben keeps pushing yields down?  The net result is a withdrawal in bank deposits substituted for treasures.  What incentive do investors have to invest in riskier mortgages and corporate debt in a lower rate induced deflationary cycle?

Investor are also loving the cuts in taxes via cuts in pensions.  As long as concessions continue to be made as a result of deflation, is there really an incentive for investors to support the increase in liquidity?



Post a comment or leave a trackback: Trackback URL.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: