Sunday, August 25, 2013

China, Japan Sell Most US Paper In Years; Foreign Treasury Holdings At 2013 Lows

China and Japan are dumping US Treasuries, which is what we predicted, and is disconcerting enough.  What's more disturbing is the composition of their dumping--short-term bills.  Because without big buyers of short-term paper, the Fed will need to step up their status as buyer of last resort.  Which takes any talk of "tapering" off the table.

US Treasury bond buyers are fleeing, and without the Fed propping up bond purchases, expect yields to spike and said bond prices to flop.   Ooops, already happening...

Junk bonds:  the US Treasury can't live with them, and they can't live without them.  The problem is I wasn't referring to high-yielding corporate bonds--I was inferring US Treasury bonds themselves.

The uproar in 2011 over the downgrading of US Treasury bonds was misplaced.  The downgrade should have been even steeper.

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