Great plan. Asian FX surplus powerhouses will throw money at sovereign junk bonds of Spain, Ireland, Portugal, a slight lifeline on indebted addicts (PIIGS/Belgium) that refuse to restructure debt. Even so, if you bought a 'junk' bond, you buy that bond on the premise of the high yield to maturity, Japan/China may just push yields further as the junk bonds become more 'junk' as the rest of the markets, says ' sure it's all yours'.
Best part, when China/Japan/Asia go into a banking crisis via China's property markets crashing, by then they would have sucked out funds out of their FX reserves (losses) whilst holding EURO ZONE junk bonds as the quality diminishes against yield blowouts.
Bloomberg 11/01/2011
"The euro advanced for the first time in four days against the yen and Treasuries declined after Japan’s Finance Minister said it was appropriate for his nation to buy bonds to support Ireland. Asian stocks slid for a third day on speculation earnings growth will falter.
The euro traded at 107.44 yen as of 12:21 p.m. in Tokyo from 107.12 yesterday. Yields on 10-year Treasuries increased two basis points to 3.31 percent. The MSCI Asia Pacific Index fell 0.2 percent to 137, set for its longest slump in almost eight weeks. Standard & Poor’s 500 Index futures were little changed, with Alcoa Inc. retreating after reporting sales that missed analyst estimates.
Japanese Finance Minister Yoshihiko Noda is joining China in signaling support for Europe, where Portugal, Spain and Italy are preparing to borrow at least $43 billion this week amid a surge in bond yields. Alcoa, traditionally the first company on the Dow Jones Industrial Average to report earnings, posted sales that missed estimates even as aluminum prices surged amid a commodity rally that has fueled inflation concerns in Asia.
“Two key risks cited for this year’s markets are already with us now: renewed concern about indebted European nations and inflation in emerging economies,” said Lim Chang Gue, who helps oversee about $27 billion at Samsung Asset Management in Seoul. “Much of these were already known, but investors are worried that nobody knows how these issues develop and by what extent. Volatility may increase in the short term.”
Euro’s Rebound
The euro touched 106.83 yen yesterday, the lowest level since Sept. 14 and advanced today on speculation Japan’s bond purchases will ease Europe’s fund-raising crisis. The single currency erased losses against the dollar to trade at $1.2956 from $1.2951. Noda said at a news conference in Tokyo today that Japan will use its foreign exchange reserves to buy the bonds.
“It will support the financial markets,” said Kazuaki Oh’e, a debt salesman in Tokyo at Canadian Imperial Bank of Commerce, the North American nation’s fifth-largest lender. “The flight to quality is unwinding.”
Europe and the euro will remain among the most important areas of investment for China’s world-record $2.65 trillion of foreign-exchange reserves, Yi Gang, deputy governor of the People’s Bank of China said on Jan. 7. Vice Premier Li Keqiang last week also expressed confidence in Spain’s financial markets and pledging more purchases of that nation’s debt.
Stocks fell worldwide yesterday as the cost of insuring European sovereign debt against default jumped to a record. Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, said he saw further “headwinds” for the U.S. economy in 2011. The Fed will release its Beige Book report on regional economic activity later this week.
Stocks Decline
MSCI’s Asian index was set for its lowest close since Dec. 30. Elpida Memory Inc. slumped 3.7 percent after the Nikkei newspaper reported the chipmaker’s quarterly operating loss may exceed 20 billion yen amid a decline in memory-chip prices.
Alumina Ltd., the Melbourne-based partner of Alcoa, sank 3.9 percent. Alcoa, the largest U.S. aluminum producer, reported fourth-quarter sales of $5.65 billion from $5.43 billion a year earlier, missing the $5.75 billion average estimate of seven analysts in a Bloomberg survey. The shares fell 1.7 percent after the close of regular trading in the U.S.
Suncorp Group Ltd., an insurer that gets 26 percent of its premiums from Queensland, declined 2.8 percent as rising waters in the Australian state headed toward the coastal city of Brisbane. The latest downpour killed at least eight people overnight, Premier Anna Bligh said on Sky News today.
Australia’s dollar depreciated against all 16 of its most actively traded counterparts and weakened to 98.66 U.S. cents from 99.56 yesterday. The currency also declined after the country’s statistics bureau said Australia’s trade surplus was A$1.93 billion ($1.9 billion) in November, compared with a revised A$2.56 billion a month earlier. The median estimate of economists surveyed by Bloomberg News was A$2.05 billion."
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