Friday, August 17, 2018

Update: No Seller, Let Alone China, Can Disrupt US via Selling US Treasury's

After publishing the previous article, HERE, the Fed and Treasury both updated weekly data series which I thought continued to highlight the case I made in the article.

First, the Fed's total Treasury holdings "only" declined by $13 billion from the previous week...however, it was the maturities of the balance sheet which continued significantly shifting.  The chart below, from 2015 to present, details it was another $39 billion reduction in 7 to 10 year debt and $12 billion reduction in 1 to 5 year holdings offset with increased holdings of $32 billion of less than 1 year maturities and an additional $6 billion of long bonds (20 to 30 years)...and in the week in which the Treasury data showed Federal Government debt crossed the $21.4 trillion mark.

Amazingly, 10 year yields again fell despite the surge in both primary and secondary supply and not a recognizable source of longer duration buying in sight.  This kind of centrally driven "demand" and rates are expected in Japan and Europe... but it's time we accept reality here.

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