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Author: Lokicious Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35272  
Subject: Re: Investing in bond funds for trip down Date: 9/13/2007 9:58 PM
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You are also, I think, assuming that the ROW puts money into the US to collect interest. This is mostly false. The main truth is that the ROW puts money into the US is because it is the safest place to put it. They are looking at it from the Will Rogers point of view: I AM NOT SO MUCH CONCERNED with the return _on_ capital as I am with the return _of_ capital."

I don't think anyone is seriously talking safer anymore when comparing US Treasury, let alone US mortgage bonds, with Western Europe, Canada, or a number of other countries with much better budget pictures.

However, there remains the question of what to do with surplus capital from US trade deficit, and there simply isn't enough borrowing going on by governments or businesses in these other countries to satisfy the need. So, I do think oil exporters, China, Japan, and others will continue to buy US Treasuries. But they may do so in smaller amounts, which would drive up yields.
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