For the EU and the US, it is over the sovereign debt crisis that could lead to a global banking crisis, a la Lehman, this time potentially much bigger. The apparent safe haven bid is on the US dollar and the US Treasuries, which drove down the yield on 10-year bond to 1.896 percent earlier today.
The supposed trigger for today's move is the resignation, though planned, of the ECB board member Juergen Stark because of conflict over the central bank's bond buying program.
Earlier this year before March 11, Japan was one of the two countries (the other is China) who pledged to buy European debts to support the Euro regime (and support their export industries). I wonder if it is still doing that.
From Reuters (9/9/2011):
NEW YORK (Reuters) - Treasury debt prices rose on Friday, taking benchmark yields to the lowest in at least 60 years as investors looked for a safe haven on revived worries a European debt crisis could have a significant global impact.
Stocks plunged on Friday, losing over 2.5 percent and bolstering the safe-haven allure of U.S. government debt, with few investors looking to go into the weekend short Treasuries due to the uncertainty surrounding the European debt crisis.
The worries over Europe were sparked by the planned resignation of European Central Bank (ECB) Executive Board Member Juergen Stark. The ECB confirmed a Reuters report that said Stark was quitting because of a conflict over the central bank's bond buying program.
"The Stark resignation just kind of raises an eyebrow at a time when there's already concerns about what's going to happen next," said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott in Philadelphia.
A debt swap meant to help Greece avoid default and win time to repair its tattered public finances hung in the balance Friday, with expectations of take-up by private creditors slipping amid fierce European pressure on Athens.
"There is a real danger that a European default or bank failure would lead to a global banking crisis akin to that seen after the fall of Lehman Brothers," said Paul Dales, U.S. economist at Capital Economics in Toronto.
Benchmark 10-year notes were trading 19/32 higher in price to yield 1.91 percent, down from 1.98 percent late Thursday. Benchmark yields touched 1.896 percent, marking the lowest since at least World War II.
(The article continues.)