Investors Spooked at Specter of Central Banks Halting Bond-Buying Spree

Treasury Secretary Steven Mnuchin right and his wife Louise Linton hold up a sheet of new $1 bills the first currency notes bearing his and U.S. Treasurer Jovita Carranza's signatures Wednesday Nov. 15 2017

Bloomberg reported overnight that (unnamed) Chinese officials had made an internal recommendation to slow or reduce purchases of US Treasuries. The report suggests that China feels US debt is becoming less attractive when compared to other types of investments.

"While U.S. -China tensions are rising, it is very unlikely that China would slow its purchases of U.S. Treasuries to warn the Trump administration against aggressive trade measures", analysts for the political risk consultancy, including Asia Director Michael Hirson and Global Strategy Director Karthik Sankaran, wrote in a note Thursday.

Investors monitor stock prices in a brokerage house in Beijing on January 2, 2018.

"To date, USA inflation pressures have remain muted". The 10-year breakeven rate, a proxy for the annual inflation rate the market expects for the next decade, climbed Tuesday to about 2.05 percent, the highest in 10 months.

China very deliberately holds $1.2 trillion of United States debt and by doing so makes a relatively risk-free investment, while sending the USA a political message that they have a hold on U.S. life-lines, the flow of money into its veins. Japan was second with USA bond holdings worth $1.09 trillion. Higher interest rates in the eurozone can attract money managers at the expense of U.S. Treasurys, which may see outflows.

"This change of dynamic suggests we may be in the midst of a regime change in the market where the dollar actually falls as USA yields rise on fears of deficit expansion and debasement of the currency", said.

"The near-term market reaction on this print is a steepening of the Treasury curve and that makes some sense given that this marginally pushes down near-term pricing of hikes".

The yield on 10-year Treasuries was four basis points higher at 2.59% as of 1:00pm in London, reversing a decline to 2.54% earlier on Wednesday.

Tuesday was one of those days where just focusing on the Dow Jones Industrial Average ($DJI) might fool you.

U.S. Treasury yields pulled back on Thursday, giving back most of their earlier advance after a solid auction for 30-year bonds.

"You already had this backdrop of rising rates and people are getting nervous", says Boris Rjavinski, senior interest rate strategist at Wells Fargo Securities in NY. Keep in mind that borrowing costs remain historically low both here and overseas, and US bonds continue to offer foreign investors a better rate than they'd get in Europe or Japan.

China's foreign reserves rose to their highest in more than a year in December, reaching $3.14 trillion, due to a stronger yuan and curbs on capital outflows.

"This happens every time rates go up", Paulsen explains.

The Gordon Brown example highlights why Commonwealth Bank of Australia is saying Wednesday's reports over China and its US Treasury holdings are unreliable.

Bill Gross, nicknamed the "bond king" during his time at USA investor Pimco, said late last night that his Janus Henderson fund is now shorting government bonds, and that bonds had entered a "bear market".

Related news:

Hot News

isis-killer-beheading-video-story-top Pence to lead U.S. delegation to Olympics in South Korea
Jan 14, 2018 - 00:06
Yarnold, who has struggled this season, has been given a top-eight target for 2018 along with team-mate Laura Deas. It is high risk, it has high reward, it has high stakes in a very competitive arena.

isis-killer-beheading-video-story-top Everton in talks with Arsenal over Theo Walcott switch, says Sam Allardyce
Jan 14, 2018 - 00:06
The Toffees are eager to add steel to their side ahead of the second half of the season, as Big Sam aims to move up the table. We have a good relationship still and I don't want him to be frustrated or to lose an opportunity to go to the World Cup".

isis-killer-beheading-video-story-top Jihadists counter-attack in fight for Syrian airbase
Jan 14, 2018 - 00:06
The Syrian army, supported by Iran-backed militias and Russian air power, began an offensive in late October in Hama province. They have recaptured dozens of villages.

isis-killer-beheading-video-story-top Florida exempt from Trump drilling plan
Jan 14, 2018 - 00:04
Shortly after the announcement, however, the president backed off his proposed drilling near the shores of the Sunshine State. Scott never took significant steps toward his promise to explore expansion of drilling in a safe, environmentally sound way.

isis-killer-beheading-video-story-top Trump on Blast, Quoted as Resistant to Immigrants From 'Sh-thole Countries'
Jan 14, 2018 - 00:03
And, former Mexican President Vincente Fox also had some choice words for Trump on Twitter . Goodlatte, R-Va., the chairman of the Judiciary Committee, were also there.

isis-killer-beheading-video-story-top Huawei wins another patent battle against Samsung in China
Jan 14, 2018 - 00:02
Senate and House intelligence committees and was sent to the Federal Communications Commission dated December 20, 2017. Of course, these three devices are sold by carriers and can be bought on long-term plans, while the Mate cannot.

isis-killer-beheading-video-story-top TN transport workers withdraw 8-day-old strike
Jan 13, 2018 - 00:36
Those involved from the union who are participating in the strike include drivers, conductors and technical staff. Transport unions in Tamil Nadu withdrew their eight-day-long strike on Thursday evening, ANI reported .

isis-killer-beheading-video-story-top Trump's Nashville Visit: What You Need To Know
Jan 13, 2018 - 00:33
Exit polls showed that rural America believed him, with 62 percent of voters in small cities or rural areas backing Trump in 2016. MTA officials say they will notify riders about changes through their social media accounts, email list and website.

isis-killer-beheading-video-story-top Government reveals plans to eliminate avoidable plastic waste
Jan 13, 2018 - 00:25
The Prime Minister also confirmed plans to explore a tax or charge on single-use packaging. It is also considering a deposit scheme to encourage recycling of plastic bottles.

isis-killer-beheading-video-story-top Uber Might Have Been Trying To Dodge Investigations With This Tool
Jan 13, 2018 - 00:23
Last February, the NYT revealed Uber used a Greyball software tool that showed officers a fake app to avoid driver tickets. Uber then cooperated with a second search warrant and agreed to collect provincial taxes for each ride, Bloomberg said.

isis-killer-beheading-video-story-top PM-economists meet: Job, farm, manufacturing, exports focus areas
Jan 13, 2018 - 00:20
Earlier, Prime Minister Narendra Modi interacted with experts and secretaries ahead of the Union Budget . Finance minister Arun Jaitley acknowledged the thought-provoking suggestions.

isis-killer-beheading-video-story-top Federal government awards San Diego $20 million for the homeless
Jan 13, 2018 - 00:20
They will report these one-night "point-in-time counts" later in the year to establish HUD's 2018 national homeless estimate. Local Massachusetts communities also report the number of persons experiencing long-term chronic homelessness decreased.

isis-killer-beheading-video-story-top Circuit City to make comeback online next month
Jan 12, 2018 - 00:34
The site will use features while search-by-photo for product listings and real-time tech support to boost customer experience. During its heyday in the 1980s and 1990s, Circuit City was the second-largest USA electronics retailer after Best Buy.

isis-killer-beheading-video-story-top Canada declares outbreak over; CDC, FDA still investigating
Jan 12, 2018 - 00:31
He said the illness onsets "occurred in late Nov & early Dec, so the source of these cases likely is no longer on the market". The US Centers for Disease Control and Prevention said the total number of those infected has climbed to 24.

isis-killer-beheading-video-story-top Super Mario Odyssey is Getting Free Update
Jan 12, 2018 - 00:23
As you'd expect, in " Find It ", players will have the opportunity to find balloons placed by other players in their own game. Here are the Sunshine Shades and Sunshine Outfit, the Musician Hat and Musician Outfit, and the Knight Helmet and Armor.