If we had to think this out logically we need look to Japan and greece for what is possible. Foreign investors shun Japanese bonds as their debt is at 233% or less of gdp. Greece managed to get foreign investors with a debt of 177% of gdp. Somewhere inbetween is the tipping point where us treasuries become a solely American economic problem. At 102% of gdp one can forgive Yellen for her dovish stance even so when she feigns hawkish rhetoric. The debt can climb as high as Greece and there will still be treasuries to sell, as discounting the coupons at a snail pace will kill the bond market ever so softly. June/July will be quite interesting considering how jumpy the market became to fed comments and statements. Since tapering began there have been instances of panic in the bond market worth mentioning. A 12 sigma bond sell off has occured. To put it into perspective in the 80's the wall street sell off was a 25 sigma event. In laymans terms the probability of an event happening occur on a bell shaped curve. The probabilities that occur within the centre of the bell are likely to occur. We travel along the curve in sigmas or standard deviations. The higher the sigma the less likely they are to occur. A 12 sigma event is half way to a major crash. The significance was that it was speculative and people were just talking about what will happen when the fed raises rates. It wasnt even happening yet. Perhaps we should all pitch into the cause and invade the bonds forum like Johnny and Skol and try to scare the sentiment out of them. Who is with me?
