As the value of the dollar falls, their reserves of the currency also reduce in value, as do the yields on the US Treasury bonds held by many of their central banks.
The US Treasury pays the Federal Reserve interest on the US Treasury bonds that the central bank has bought on the open market as part of its quantitative easing, but the Fed always sends that money right back again.
Mr Jarnefelt's specialist area - German government bonds - is among the most stable in the market because, along with those issued by the US (called Treasury bonds), they are seen as among the lowest risk in the world.
As if to underline the point, yields on US Treasury bonds actually fell in the days after the downgrade, as investors fled to them as a haven.
With the integrity of the eurozone, one of the three great economic areas, in some doubt, it is seriously discombobulating for banks, sovereign wealth funds, pension funds, insurers and central banks that the safe harbour of US Treasury Bonds, US government debt, no longer looks quite the comforting refuge in a storm that it once was.
Also, whenever investors believe that the world is becoming a riskier place, their instinct is to buy US Treasury Bonds, to lend to the US government.
The popular Chairman of the House Budget Committee said on CNBC May 17 that it would be okay if the US ceased paying holders of Treasury bonds for three or more days because it would give the country a few days to catch a breather and pay those debts later on.
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Since this would have amounted to direct losses to the banks that lent the money, the difference was smoothed over by "securitizing" the new loans against US Treasury bonds, which carry a zero interest rate and are totally safe.
China may very well diversify away from the dollar and even US Treasury bonds, but it is hard to see any major government holder of US dollars going from a 95% dollar position to a 60% position, or even a 50% or lower position anytime soon.
If QE3 were to happen, my take and my advice would be take the charts of gold, oil, Treasury bonds, stocks, and the US dollar index.
Every day that the US government takes your tax money and uses to avoid issuing more 10 year Treasury Bonds is a day that the US government is buying an Interest Rate Swap on your behalf.
One look at the risk market shows that Treasury yields are falling as demand for the safety of US government bonds has returned to the market.
One of the ways the market measures credit risks is by looking at the spreds of credit default swaps, a default insurance derivatives market that measures the risk of buying foreign bonds as compared to buying a comparable maturity from the US Treasury.
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Treasury bonds are how the US borrows money which it looks to other countries and institutions to buy.
That is when the government has to pay interest on US Treasury bonds.
And yet despite the massive outgoings in foreign aid, the receiving countries hold trillions of dollars in US Treasury bonds.
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For example, from January 1, 1926-July 31, 2012, long-term government bonds returned 5.77% annualized compared to 5.36% for five-year US Treasury notes but the long-term bonds had nearly double the volatility (Source: Ibbotson and Sinquefield).
We also found out today that Pimco, the world's largest bond fund, has been buying US treasury bonds again.
Given that US Savings Bonds are just as safe as the 20 year Treasury, getting almost a half-percent more yield is great.
Things were so good that in 2000 some market watchers were worried that the government would never issue 30 year Treasury bonds again, robbing us of a valuable benchmark.
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While his dollars were enjoying the security of the world's safest investment - Treasury bonds have never failed to pay out - most US investors were taking a financial "rain-check" and cancelling their summer vacations.
The plan, which is similar to measures taken by the US Federal Reserve, includes about 2tn yen in Japanese government bonds, as well as about 10tn yen in treasury bills.
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