Dan norcini said...................
Japanese Money Flooding European Bond Markets
The mystery, at least in my mind, of the rising Euro is now clear. Outflows of Japanese institutional money is pouring into the European bond markets in search of higher yield.

Consider the following - the yield on a 10 year Japanese government bond has fallen to 0.525%. Yes, that is not a typographical error. If you buy one of those things, you are locking money up in an IOU for TEN YEARS to obtain a half a percentage point of interest. If that is not bad enough, the underlying currency is also freefalling in value. Now, who in the world would want to do that besides the monetary authorities in Japan who are becoming and likely are going to end up staying that way, as the largest, if not sole buyer of Japanese government debt?

Believe it or not, with all the massive problems in Spain and Italy, the yield on the Spanish 10 year bond has now fallen to its LOWEST level in a year. Italian bond yields are down to 4.36%! Dow Jones is reporting that last Friday and this Monday, the yield on the 10 year notes of France, the Netherlands, Austria and Belgium hit RECORD LOWS! This is Japanese money fleeing into European bonds.

Now here is what is even more mind boggling - the Bank of Japan's own data shows that Japanese institutions hold a gargantuan $6.34 TRILLION of domestic government bonds! This is not a tide of money, it is a tsunami looking for yield!

Bubble in the US stock market? Yes, in my opinion but the bubble is going to get even bigger. Heaven help everyone of us on the planet when this man-made disaster finally reaches its crescendo!

Absolutely. I agree on his two major points:
1) Money is fleeing Japan in order to offset the devalued Yen. And it's going into risky assets. Furthermore, with 10Y JGBs yielding 0.52% and Japan's stated goal of creating 2% inflation, why would anyone in Japan want to own JGBs ? The problem is that JGB selling may well drive up the rates on those bonds and with a 220% debt/GDP, Japan cannot tolerate higher rates. It would cause the deficits to increase and even a small increase is very dangerous for Japan.
2) When all of this CB money printing explodes it will be huge. Far worse than 2008. And there will be nothing the CBs can do about it. They're all in now. More money printing will only make things worse. Timing the collapse is crucial unless you just wait it out in gold.