Friday, September 14, 2007 0 comments ++[ CLICK TO COMMENT ]++

US Long Bonds Moving Along With the Yen

Although this isn't anything dramatic, I have noticed the high correlation between US long bonds and the Japanese Yen lately. The following chart of Yen and TLT, the 20 yr US Treasury bond ETF, illustrates this point perfectly.

(source: finance.yahoo.com)

For all of 2007, but especially in the last few months, the US long bonds have behaved similarly as the Yen. I am not sure if this is a coincidence that won't going to last, or if this is a pattern that may develop further, but I'll be keeping a close eye on it. This could simply be capital flight (both Yen and US Treasuries are safe havens in terms of valuations) so it may be a coincidence.

Since I am long TLT, and think the Yen carry-trade may unwind soon, it may not make sense to sell TLT until the Yen finishes its move.

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