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’US Treasury: NOBODY MENTION CHINA
The Department of the Treasury
MEMORANDUM
To: Staff (All)
Re: C***A
Reuters has painstakingly followed up on a rule change made in 2009 to how bidders in US debt auctions are classified,
$8,000bn speaks reserve currencies
The dollar is down, the euro is out, and SDRs are in. Results from UBS’s reserve management survey, canvassing institutions with a collective $8,000bn of assets:
China is finally buying fewer US Treasuries, StanChart says
After numerous false starts, China appears to be buying fewer US assets.
At least, according to the analysts over at Standard Chartered.
Here’s why:
Today we present evidence which suggests that China is buying fewer US dollar (USD) assets with its new FX reserves.
The collateral crunch
It gets less attention than its credit-denominated relative, but the 2008 financial crisis actually sprung from a massive ‘collateral crunch’ within the shadow banking system.
Read Manmohan Singh on rehypothecation,
Bill Gross: do not buy expensive bonds
Wednesday’s 38,000 rise in ADP employment is another unreliable yet unnerving data point for the US economy and seemed to be driving 10-year US Treasuries close to 3 per cent at pixel time.
The bear market for bonds might be coming but it’s sure taking its time.
‘Real’ US Treasury yields go back to zero
The effects of stubborn inflation and persistently low bond yields charted for the benchmark 10-year US Treasury, by Reuters’ financial graphics-guru Scotty Barber:
There’s an even longer chart — plus an explanation — over here.
Albert Edwards and an afternoon tea-party with the Vestal Virgins
Breaking news.
Albert Edwards is bullish.
Bullish on US Treasuries that is, which the SocGen strategist expects to hit record levels before before government profligacy and the Fed’s printing presses take the world back to both double-digit inflation and bond yields.
All hail the negative repo regime
The repo rate normally trades closely to money market rates. This is sometimes referred to as the general collateral rate. But sometimes a particular security is in demand for borrowing purposes. This is because there are many dealers who have gone short of that security.
Honey, I broke the repo market
If you’re a money market fund manager, you’ll already be aware (plus possibly extremely concerned about) that general collateral rates are approaching zero. If you’re not, then read on.
As a reminder,
Delaying a US default 101
We are 12 days from hitting the $14,300bn US debt ceiling. And, perhaps more importantly, just a few months away from when the Treasury will run out of accounting moves that can prevent a default.
And if you’re wondering what these accounting moves are exactly,
QEnding: rates and fates
A lot of people have been hard at work lately disputing the Pimco-nian idea that the end of QE2 will lead to an inevitable climb in yields.
Bloomberg, in a story about the continued demand for off-the-run Treasuries,
The coming QEnding
Or, supply dynamics in quantitative easing. Required reading for a quiet Wednesday, really.
Remember how QE works. The Federal Reserve buys US Treasuries from investors in the hopes of pushing them into things like corporate credit,
QEased credit – but maybe not for long
It’s money money everywhere and not that much to buy.
Citigroup credit strategist Matt King has a nice note out on Wednesday attempting to delve into the ‘cash on the sidelines’ notion — or the idea that there’s a wall of money just waiting to be invested.
Better the quality collateral you know?
Not even an S&P warning over the state of the US debt pile has been enough to take the shine off US Treasuries.
On Monday, 10-year US yields actually ended up falling (after briefly rising) following the credit rating agency’s announcement:
The banking system – still broken
Here’s a perfectly nuanced view of how quantitative easing — the programme started by the Federal Reserve to avert depression following an almighty banking bubble — impacts asset prices.
First, envision part of the QE process.
Grossly unimpressed: Pimco shorts US government debt
Pimco is not amused with the political impasse in Washington.
From Reuters on Monday morning:
PIMCO has shifted to a short position in U.S. government-related debt in the world’s largest bond fund,
The importance of debt maturity
Boring title, we know. But stick with us ’cause there’s all sorts of thematic points in here — from sovereign debt crises to the weakness of short-term financing to interest rate shocks.
After the financial crisis,
Mrs Watanabe fears a global market dislocation
Talk of Japanese investors repatriating their foreign exchange holdings continues.
And with headlines like “Japan’s Mrs. Watanabe says: ‘hold off on carry trade,” how could it not? Hold the thought,
Jefferies: limited risk of TSY selloff by insurance companies
The 1995 Kobe earthquake took place on January 17, but it wasn’t until September of that year that Japanese investors became net sellers of US treasuries:
The graph is from Jefferies (HT Anousha Sakoui),
Gross dumps his US government debt
Holdings of US Treasuries at the world’s largest bond fund — Pimco’s Total Return — have fallen to zero. Bill Gross really isn’t hanging around for the waitress’s reaction.
(Via Zerohedge).
From inflation to stagflation
Some grumbling from the belly of the US Treasury curve.
US Treasuries had a rollercoaster day on Wednesday as soaring crude sent the 10-year yield lower by 6 basis points. UST gains then reversed within a couple of hours.
Diplomacy by US Treasuries
Here’s a year-old quote from the Inner Workings blog of the Asia Times:
Dollar-denominated risk assets, including asset-backed securities and corporates, are no longer wanted at the State Administration of Foreign Exchange (SAFE),
Gaddafi’s market – US edition
Spotted: Vix, the ‘fear gauge’, up nearly 28 per cent on Tuesday.
A 2011 Egyptian revolution-encompassing high. (Though still way below 2010 eurozone-crisis levels.) According to VelocityShares,
Return-free risk
Chart via JPMorgan’s Global Asset Allocation team:
As they explain further:
Bond sectors that were traditionally considered “safe” are no longer “safe”, inducing bond investors to rethink both their portfolios and risk management.