Back when The Daily Show was funny and relevant, John Stewart used to end with "A moment of Zen" to capture the day's absurdity. Today's moment comes courtesy of Section C page 3 of the WSJ. Top headline: Yen Traders Fret Over Japan's Stimulus... Below: Tokyo takes long View:50 Year Debt..and to the side: Longer Bonds Hold Risks for Investors.
The Cliff's Notes version - Everyone has borrowed yen to buy long term bonds that don't yield very much but everyone wants them for capital gains in strange ETFs, so 50 year bonds sound great except the market is getting clobbered this month, wiping out years of returns and causing said massive positions to be unwound. But governments buy most of them anyway, which may or may not be inflationary depending on whether you are talking to Rick Santelli or the CEO of Whole Foods. Got It? And I wondered why neither of our would-be Presidents have commented on monetary policy.
My disinterest in government FI over the last 3 years has been well chronicled in this Blog. "Anything, and everything else" has been my advice. Hoarding low coupon debt for price increases is the Yang to the early 80's "certificates of confiscation" Ying . Yesterday, the Fed meeting results were released to the usual micro-parsing and insignificance. The Fed, I am now told by the parade of "watchers", "strategists" and "traders" is now Data Dependent. Zen moment redux.
The term structure of interest rates (Some guy, I heard he was awesome, used to speak of it on TV) is fercocked. The Journey back to Ixtlan (#GIK) will be a wild and transformative process far beyond the grasp of our soon to be Commander in Chief. It is ALWAYS about the positions. Those positions are starting to change.