Bond-market blogger John Jansen is more skilled at offering pithy commentary than I am. His comments on the market one day last week capture the core of today’s global economy - at least today’s international financial system. Jansen:
It was an active overseas session.
Asian buyers of 2 year notes.
End user and swap desk buying of 10year notes.
Banks and hot money selling 5 years.
Asian buyers of 5years.
Central banks buying across the curve.
Middle Eastern bill buyers.
Central bank buying across the curve. That is a pretty good title for much of my recent work -- though I tend to get hung up explaining why not all those purchases register in the US data in real time.
A lot of recent central bank purchases have actually been showing up in the US data, or at least in the Federal Reserve Bank of New York’s custodial accounts. Those accounts have been growing at a $40b a month pace in 2008,or an annual pace of close to $500 billion. That is real money in my book. And with central bank reserve growth running at close to $100b a month on average in 2007 -- and likely a comparable pace in 2008 -- the FRBNY custodial accounts probably aren’t picking up all central bank purchases.