Tag: US Treasuries

The Government Just Lost Its Biggest Financial Supporter

From Peter Reagan at Birch Gold Group

The way the U.S. government funds its absurd, multi-trillion-dollar spending sprees is to auction off IOUs. These promises-to-pay have, traditionally, been treated almost exactly like money.

When there are lots of buyers, and competitive bidding, the cost of financing government debt is low (as it has been for the last 20 years).

But what if the government held an IOU auction and nobody came?

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The Collapse of the ‘Risk-Free’ Delusion: Implications for the $133 Trillion Bond Market

Guest Post by Nick Giambruno

$133 Trillion Bond Market

Did you know that 2022 was the WORST year for US Treasuries in American history?

The benchmark 10-year Treasury fell nearly 18%, and the 30-year Treasury collapsed over 39%. Many other bonds did even worse.

Even if you go back 250 years, you can’t find a worse year for Treasuries, the foundation of the colossal global bond market.

It should forever end the ridiculous—yet pervasive—delusion that Treasuries are “risk-free.”

Many people and almost every financial institution have long thoughtlessly accepted this trope.

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Treasurys Tumble, Futures Slide On Report China “To Slow Or Halt” Treasury Purchases

Will this be the trigger?

The treasuries complex has sold off aggressively across the curve after the following flashing red Bloomberg headline:

– CHINA OFFICIALS ARE SAID TO VIEW TREASURIES AS LESS ATTRACTIVE.
– CHINA OFFICIALS SAID TO RECOMMEND SLOWING OR HALTING TSY BUYING

As Bloomberg reports, “Officials reviewing China’s FX holdings have recommended slowing or halting purchases of US Treasuries, according to people familiar with the matter.”

The reasoning given is that the market for US government bonds is becoming less attractive relative to other assets, while trade tensions with the US may provide a reason to slow or stop buying American debt.

As Bloomberg further notes “The people didn’t specify why trade tensions would spur a cutback in Treasuries purchases, though foreign holdings of US securities have sometimes been a geopolitical football in the past.”

The news has been interpreted as Beijing wanting to send a signal to the US that it is willing to use financial means to respond to any shifts in US policy on issues such as trade.

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“De-Dollarization” Deepens: Russia Buys Most Gold In Six Months, Continues Selling US Treasuries

Tyler Durden's picture

Submitted by Tyler Durden on 01/18/2015 15:00 -0500

The rumors of Russia selling its gold reserves, it is now clear, were greatly exaggerated as not only did Putin not sell, Russian gold reserves rose by their largest amount in six months in December to just over $46 billion (near the highest since April 2013). It appears all the “Russia is selling” chatter did was lower prices enabling them to gather non-fiat physical assets at a lower cost. On the other hand, there is another trend that continues for the Russians – that of reducing their exposure to US Treasury debt. For the 20th month in a row, Russia’s holdings of US Treasury debt fell year-over-year – selling into the strength.  

Buying low…

Russia gold reserves jump the most in six months in December, near the highest since April 2013…

 

and selling high…

Russian holdings of US Treasuries are now at the 2nd lowest since 2008…

 

It would appear the greatest rotations that no one is talking about are the fiat to non-fiat and the paper to physical shifts occurring in China and Russia.

Charts: Bloomberg

Some have commented on the “unprecedented” capital flight from Russia, but as Dr. Constantin Gurdgiev explains – Western ‘analysts’ appear to have forgotten a few things…

Central Bank of Russia released full-year 2014 capital outflows figures, prompting cheerful chatter from the US officials and academics gleefully loading the demise of the Russian economy.