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I read the entire article closely and I can't grasp why this will affect global capital markets (beyond all Japanese investors control a lot of US treasury bond
by dmix 4y ago
I read the entire article closely and I can't grasp why this will affect global capital markets (beyond all Japanese investors control a lot of US treasury bonds). Probably because I don't know what "25 bps" means in context.
Anyone care to explain in simpler terms?
Is it just that 'volatility' in the global bond market will increase because Japan will stop investing in treasuries?
- niij 4y agoBasis points (hundredths of a percent) 25 bps = 0.25%
- NavinF 4y agoThat's pretty much it. He's saying that buying US bonds is no longer the obvious choice for Japanese investors. That also makes it harder for the US to borrow and fund our 6.27T budget. 0.25% harder
- thoughtstheseus 4y agoMany investors would do well to consider a hedge on the currency risk.
- Ifkaluva 4y agoMy understanding is that Japanese investors will be slightly less motivated to buy US bonds. Since they are the biggest buyers, this will slightly dampen demand for US bonds. This I guess could play out a number of different ways--potentially the US has to pay higher interest to borrow. Alternatively if the Fed were to soak up bonds it would drive up inflation. Tough to say exactly what will happen once it interacts with all the moving parts of the global financial system.