We hear this stuff a few times a year and it is usually blown way out of proportion by the media and analysts. There is a very large coupon payment to be made this month by the US government, on February 15. Somewhere in the range of $22.8 bln will be paid. Japanese investors hold a chunk of the debt.
The assumption is that those investors will repatriate every dime of interest earned. That’s very short-sighted, in my view. We tend to get all whipped up about this issue and it turns out to be a “damp squib” as Gerry would say. Lots of the interest will be reinvested, right here in the good ol’ US of A.
The story made the rounds this morning and shook out some of the sizable stable of longs waiting for higher US yields to finally give the dollar a boost versus the low-yielding JPY…
