Does Basel III change the game....
Currently, the Federal Reserve purchases 70% of US Treasuries issued. When QE2 stops, who will pick up the slack?
Well... the answer, I believe, is in the new Basel III regulations.... ALL the banks will "choose to buy" treasuries... to meet new liquidity requirements!
The banks will start loading up now to meet 2015 deadlines for "on hand liquidity"
HOWEVER... in the NEXT systemic crash... what then happens to price of treasuries? Especially if everybody has to liquidate their "safe haven" assets"?
In a Major Banking Event, you WANT treauries to keep stable as a "safe haven". Treasuries cannot be a safe haven if everybody sells en masse to cover their a**es!
BOOM... treasuries implode instantly. THAT is how the Treasury Bubble will implode.
Holy Shit. "They" have been PLANNING to pop the bubble!
'In my opinion, the implications of this are crystal clear: banks will obviously need to dramatically ramp up their holdings of these securities (mainly treasuries) in order to comply with the LCR ratio. This could provide a significant tailwind to treasury demand over the near to intermediate term. S&P says it best, “We believe there is a risk that this standard is too conservative- to the point where it could create a shortage of liquid assets…”'