42 sats \ 5 replies \ @GxqoRR 26 Oct 2023 \ on: Why the US Dollar is Surging Against the Japanese Yen bitcoin
Agree. I think USD is stronger against most other major currencies at the moment. It also means people have confidence in the currency. But with higher interest rate, it also comes more debts, since US has to pay those interests. I wonder how long it will last, until people lose confidence because of the massive debt.
I wonder too. For now, it seems like there is growing demand, worldwide among regular people, for US bonds.
The Treasury Direct service saw a fivefold increase in its number of new accounts.
Money market accounts saw a 500x increase in retail assets under management.
Everyone and their mother is buying USA bonds to combat inflation, and although some governments are selling USA bonds to prop up their national currencies, it doesn't seem to be working -- the market just buys them right up and keeps on trucking. The USA can keep issuing bonds too because the market just loves them right now. I don't know when it will get saturated but right now it's like pure, growing gluttony.
The world wants US debt. I suppose their own countries' debt is just much less attractive.
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Also worth noting: in 2019 the average volume of the ishares government bond ETF was $81,643,000 in trades per day.
In 2023, so far, it is $229,300,000.
A nearly 300% increase in volume. Appetite for US debt is somehow growing among retail and professional traders even as the possibility of repayment, in real terms, shrinks. People on the podcasts I listen to keep asking "who's gonna buy all this debt the USA keeps issuing? Foreign governments are all selling."
I think the answer is: traders will buy it, both retail and pro, and regular people opening up money market accounts to try to beat inflation. The latter probably don't even know what they are buying. If inflation gets back up to 7% or so, people will think they are fighting it by getting 5% returns through buying ever more government debt. So I plan to tell them about bitcoin and why it's a better option. But nonetheless I don't think the USA will have trouble finding buyers for their debt in the near term.
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It's interesting that both articles say there is weak demand for us bonds on wall street but yet acknowledge that every bond on offer was purchased
82% by wall street funds and 18% by "dealers." I'm not sure who dealers are but I'll bet they are a wall street fund
Edit: Maybe it's these people: https://www.bdamerica.org/
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Here's my take. The traditional big buyers China, Japan and other govs have stopped buying. That's either for political reasons or they're legitimately worried that "last man standing" dollar is in trouble too. As you point out, retail investors love the yield, especially as the stock market crashes. But, if you hold the bonds for any length of time, your 5% gets eaten up by inflation. Also, if you hold bonds as collateral, the value drops as yield rises. You can decide to hold to term, like a two year maybe. But then the govt. is paying you back with debased dollars. Demand will never completely disappear, since lots of funds have a certain allocation to fixed income.
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