My first guess for the source of such collateral would be US and UK government bonds.
European stock markets rose Thursday, boosted by a successful auction of Spanish government bonds.
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One has to ask the obvious question: why have European banks bought so many government bonds?
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Ordinary Italians are being urged to do their patriotic duty and to buy government bonds.
Spanish and Italian government bonds weakened, as did more-speculative currencies like the South African rand.
All this means that the risk-reward ratio for holding government bonds looks pretty skewed.
Investors are getting rid of risky investments and buying safer assets, such as government bonds.
On the first question, yes, stocks are cheap compared to 10-year government bonds yields.
This will include the purchase of government bonds, corporate bonds, stocks, and possibly foreign government bonds.
Short term government bonds pay at least 7.25%, sometimes more depending on the maturity date.
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With ten-year government bonds in Japan going for 1.6%, loans can be had dirt cheap.
So the expectation is that the central bank will buy government bonds of Spain and Italy.
Spreads on Greek government bonds over German Bunds have widened to more than 2.5 percentage points.
This means buying the equivalent of 70% of the total long-term government bonds in markets.
And it looks as if this was largely in Greek Government and Cypriot Government bonds.
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But CIC Chairman Lou Jiwei said Monday that the fund wouldn't invest in European government bonds.
But that is what seems to be happening with Swiss Government bonds right now in Europe.
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Perhaps the biggest and most liquid of all markets is that for U.S. government bonds.
To a lot of people, the current yield on government bonds just makes no sense.
But the relationship between yields and risk in government bonds has taken an odd turn.
Many investors think of U.S. government bonds when they think of going on the defensive.
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Higher rates would attract foreign investors looking to buy Brazilian government bonds priced in reals.
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Greek social security funds hold nearly two-thirds of their liquid assets in government bonds.
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In 2009, hedge funds generated about 3% of trading volume in U.S. government bonds.
Since its portfolio consists entirely of U.S. government bonds, some people might even think it's safe.
That is the only explanation for the relative calm on the market for U.S. government bonds.
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In 2010 or 2011, issuing government bonds may prove a much harder (and more expensive) task.
For decades, US government bonds were the gold standard for long-term, risk free fixed income investors.
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There's an emerging-market government bonds section, news on global markets and Asia Pacific Equities.
He says risk-averse investors need not settle for the 4% yield on ten-year government bonds.
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