Yeah, thx for catching that. It has been a long week of trading the us plus the asian markets and I am a little tired, so try not to get your panties too bunched. I think you could catch my meaning, couldn't you? Or do you just need to show the world how smart you are. I am surely impressed!
Pls. do not take it negatively, because it was not meant that way. I do not trade asian markets, so I would be interested to learn what you trade/when/etc. Cheers!
They are not earning 1%, they are making 5% to 10%. They are not buying them for the coupon, they are buying them for the price appreciation. Treasury bond funds are up 10% to 30% the last year. That is not coming from the yield.
You understand something, but your last sentence can be misleading or reflects a lack of full understanding. The gain is still coming from the yield, because it results from a CHANGE in the yield. Where did you go to school?
Huh? I said they are not buying them for their yield. The gain is coming from convexity. Don't see the correlation with my school.
because countries only have 3 things they can buy with their dollars. Oil, gold, or treasuries. If they buy oil, the price skyrockets and their economies tank. If they buy gold, just a single billion dollars into the gold market pushes prices up, so when they want to sell, they can expect the same thing. Treasuries are very liquid, they can be bought and sold with billion of dollars without moving the market. So its sit on the cash, or sit on treasuries earning 1%.
the main thing you are missing is that in a deflation there is a "flight to quality". a checking account or demand deposit is a liability on the banks balance sheet. your money is nothing more than a few digits which will disappear if the bank goes under. since all banks in a fractional reserve system are inherently fraudulent and vulnerable to a bank run you are at serious risk of losing everything. there is FDIC deposit insuracce but that is only $250k. for millions and billions FDIC is useless. treasuries are a direct claim on physical federal reserve notes. so you are safe no matter how many banks fail.
sitting in cash literally means sitting in short term treasuries. keeping hundreds of millions with a bank would be the height of stupidity.
there are some outstanding articles from this gentlemen named professor fekete which I will post here when I find them.
bond speculation is of course another reason. traders are basically front running the fed.