Q3 2005
By John Schroy, on February 21st, 2006 |

Life insurance companies invest pension and life insurance reserves primarily in bonds, according to Federal Reserve Flow of Funds Table F 117 for Q3 2005. Although favoring agency securities and treasuries in 2002, life insurers quickly returned to their traditional investment behavior of buying mostly corporate bonds.
Since 1997, pension funds have become the principal business of life insurance companies, as indicated by the relative size of life insurance and pension funds reserves.
US Bond Market
By John Schroy, on February 20th, 2006 |

This article describes the factors that influence the four primary US bond markets: Treasuries, Agencies, Municipals, and Corporates.
The analysis indicates that a high percentage of the supply side of the bond market is opportunistic and sensitive to interest rates, which explains why long-term interest rates have been relatively stable, despite increasing demand.
This analysis also suggests that should the flow of funds from the trade deficit suddenly dry up, the first impact would be a rapid reduction in the size of the residential mortgage market, rather than a sharp increase in interest rates.
World Economy
By John Schroy, on February 19th, 2006 |

It used to be that the term ‘international liquidity’ meant the relative amount of resources available to a nation’s monetary authorities that could be used to settle a balance of payments deficit. In the days of the gold standard, this would mean access to gold that could be used to redeem a nation’s currency held by foreigners.
After Bretton Woods and the advent of the dollar-gold exchange standard, liquidity came to mean access to dollars, either held as reserves or as credit lines, or the SDR system maintained by the International Monetary Fund.
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