Treasury Market Rumblings
One of the key indicators that I keep a semi-open eye on throughout every trading day is the price of US Treasurys. As you know, the US is living on the kindness of strangers, and if foreign desire for US Treasury obligations wanes, much trouble could quickly mount for the US dollar and general fiscal condition.
As prices for Treasurys rise or sink, interest rates move in exactly opposite directions..
Like any asset class, the price of Treasurys will rise if there are more buyers than sellers, and sink if there are more sellers than buyers.
A natural, normal, and healthy reason for Treasurys to sink in price would be investors leaving the “flight to safety” trade because they perceive economic conditions to be improving. Less good reasons include the fear of inflation picking up, over-issuance by the government, and foreign entities leaving the trade.
Treasurys
Much has been written lately about the selloff in Treasurys, but there’s really not too much to talk about yet. As I see it, they remain largely range-bound, as exemplified by this chart of ten-year bonds:
This is not much of a sell-off, although it is certainly something to remain on alert for, especially if the ten-year breaks down and conclusively out of this range.
Of additional interest here is that, according to the Treasury Department, foreign holdings of Treasury bills, notes, and bonds have increased by slightly more than 13.8% between January 2011 and January 2012, but only by a measly 2.9% over the prior four months (Sept – Jan). The 2.9% represents an increase of just $145 billion over all four months (or just ~$36 billion per month).
That is, foreign accumulation has slowed sharply. This could prove problematic sooner rather than later.
by former_user 
