Wednesday, June 19, 2013

U.S. Government Bond Strike By Foreign Investors

I have previously discussed the so-called bond strike in Japan and argued that it was rational, but that a bond strike was rational with regard to many other governments bonds as well, including U.S. Treasury securities.

As is noted here, it now seems that many foreign (meaning in this context, non-Americans) investors are finally realizing it too. Both governmental and private foreign investors sold more Treasuries than they bought in April, and though both are still net buyers during the latest year, net purchases have dropped dramatically, from $173 billion to  $116 billion for governments and from $289 billion to $122 billion for private investors. Instead, they have bought more stocks and higher yielding agency and corporate bonds.

This is of cource a partial explanation both for the rise in Treasury yields and in stock prices.


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