The World is buying US notes and bonds in record numbers

This was just posted on Bloomberg.com today:

Treasury Demand Enough to Absorb Supply, Goldman Says (Update1)


By Bo Nielsen

Aug. 19 (Bloomberg) -- Demand for Treasuries will be sufficient to absorb the record amount of debt the U.S. is selling amid a $12.8 trillion pledge by policy makers to combat the recession, according to Goldman Sachs Group Inc.

Purchases by foreign investors will be augmented by appetite from U.S.-based buyers looking to add to savings or increase the duration of their assets, Michael Vaknin, an analyst for Goldman Sachs in London, wrote in a note today.

President Barack Obama has pushed U.S. marketable debt to an unprecedented $6.78 trillion as the government seeks to revive the world’s biggest economy. Billionaire investor Warren Buffett said it may pose a threat as ominous as the crisis itself. The Federal Reserve has more than doubled the size of its balance sheet in the past 12 months to $2.02 trillion by buying Treasuries and other securities to unlock credit markets.

“When you add up the picture on Fed buying, foreign participation and domestic savings, you get a fairly supportive picture for Treasuries,” Vaknin said today in an interview. “Over the past year, bond yields have drifted meaningfully higher relative to what could have been justified by macro fundamentals and the decline in yields from the local highs in early June can be partly seen as a valuation correction.”

Gains for Treasuries will push the yield on the benchmark 10-year note to 3.3 percent in three months and 3.0 percent in six months, according to Goldman Sachs. The yield fell 7 basis points to 3.44 percent as of 11:18 a.m. in New York today, according to BGCantor Market Data.

Is Goldman involved in this shell game, or are they merely providing cover?
If a shell game is going on, then the same crooks that necessitated the orginal bailout, are still playing dirty.

reply to post by ProfEmeritus

That's right. People naively believe that all those higher profile bloggers are taking on themselves the righteous mission to look after the populace. The fact is though that they try to play their own game and misinform anyone whenever it serves their purpose. I know perfectly the strategy: they use highly esoteric language to demonstrate their knowledge of a subject and at the same time to obscure the flaw in the arguments. But the final paragraph is always written in plain English and is a variation on one theme: Do as I say, or you're in trouble.

reply to post by stander


If you look at the past postings of the ppl I posted from you will
see they provide good information through out the past.

If you look at the financial pirates you will see they sometimes
bend the truth beyond the point of recognition.

Bernanke himself refused to tell congress where some of
the money the Fed printed went.

I can tell you where some of it went.

It went in a circle to buy our own bonds and T-bills.

We have been warned by dozens of ppl even from other countries,
that have shown how this disaster is done on purpose to various
nations.

Confessions of an Economic Hitman

Ignore it at your peril.

Hey Prof!!

How does this report fit into your thesis?

financialsense.com...

The foreign creditors are moving away from the United States, plain and simple. The big bold red series shows the Grand Net US$-based bond reduction in net flow change from a high around $950 billion in early 2007 to a figure now approaching only $200 billion, thus a severe cut in net inflow. The greater alarm comes from the USCorporate Bonds in the yellow series, whose net flow change is down from a plus $600 billion high at the same time to a slight net outflow negative figure now. The USAgency Mortgage Bonds in chartreuse/mauve/pink have net flow change with peak of plus $300 billion at the same time to a net outflow of a frightening $150 billion now. Since the important peak for mortgage and corporate bonds, the USTreasurys in blue series have recovered from a $200 billion net positive inflow to a $400 billion net inflow. However, one should suspect that the USFed is purchasing the USTreasurys from convenient accounts bearing foreign names, using American funds, and laced with sinister motives founded in deception. Foreigners in all likelihood are not the primary purchasers.

The foreign purchase declines from peak levels two years ago have fallen off a cliff, much like that of Acapulco. The image of a brave diver is also quite vivid, as risk is determined by the shifting water (liquidity) level. The United States credit markets are losing their legitimate liquidity and increasingly are turning to the desperate reckless alternative, namely the dreaded MONETIZATION. Mortgages in the United States must maintain funding from the USFed and USGovt by direct purchase, no longer a market action. There are mainly sellers. The corporations in the US must maintain funding from a more desperate means. See the Samurai Bonds offered in Japanese Yen denomination, the ones growing in popularity. My view is that a good slice of USGovt Treasury Bonds will be denominated in foreign currency routinely within one year, if the US$ system survives in its current form that long. The conclusion is clear from the messages, both graphic and statistical, that THE US$-BASED BONDS OF ALL TYPES WILL RELY ON DIRECT MONETIZATION VERY SOON OR IMMEDIATELY.

See the link for the chart porn

reply to post by redhatty

How does this report fit into your thesis?

I posted this article for consideration and debate. It is not my thesis. I asked some questions. Maybe you missed my post in this thread:

This entire affair is far from settled, in my opinion. So far, we have two bloggers, one of whom, Martenson, makes a living selling analysis of financial data. In my opinion, all he has done is present some interesting facts, which COULD be interpreted as fraud, but could also be just coincidence. Personally, I don't have a dog in this fight, so let's just see where this goes.

I have an open mind. Further, the OP talked about ONE month's possible turnaround. No one is arguing that over the recent past, there was a definite downturn in US financial instruments.

In the world market, one thing is certain. Things can take sudden turns very quickly. All you need to do, is revisit the history of last September to understand that.

reply to post by ProfEmeritus


My mistake, I thought it was a position you were promoting. I was lead to believe that by the differences between your thread title, "The World is buying US notes and bonds in record numbers," the OP, and the title of the bloomberg article, "Foreign Demand for Long-Term U.S. Assets Rebounded".

You didn't mention Martenson until after a responding poster brought up his blog.

Maybe we should all follow the "Breaking News" thread title format when we are opening with an article from another site & keep the original Title. It might cause less confusion.

reply to post by redhatty

Maybe we should all follow the "Breaking News" thread title format when we are opening with an article from another site & keep the original Title. It might cause less confusion.

Actually, I was trying to follow the ATS guidelines. The title on Drudge was "The World is buying US notes and bonds in record numbers". It linked to the article that was quoted. Unfortunately, Drudge seems to do that quite a bit. I'm never sure what the Mods will do, so I used the title that was on the original news headline. It is confusing, but, as I said, it was Drudge's title, not mine.

Just to give some real #'s to the buy back operations... So far the FED has bought back:

30 year: $52.29B
20 year: $0.584B
10 year: $42.634B
7 year: $38.288B - this one is over 20% of the issue, which just began this year

I'm still compiling info on the smaller bills and notes.

You notice though that the highest amount that the FED has bought is in the 30 yr Bonds. And with each buyback operation, there are MANY MORE offered than accepted for buyback.

reply to post by redhatty

I'm sure you've researched the numbers, and I accept them. That brings up an interesting question. Since the article I quoted was from Bloomberg.com, and they are supposedly very knowledgeable concerning financial matters, are they ALSO involved in the shell game that the Fed seems to be playing? By that, I mean , are they lying and providing cover for the Fed's seemingly treacherous actions?

Are they flat out lying, well that implies that the author is fully aware of the truth, doesn't it?

It depends on what the author of the article is looking at, and where the mindset of the author is prior to writing the piece.

There are a lot of pundits out there trying to put a good spin on every piece of news, such as the bad being better than expected, it's still bad, just not fire & flames in the pits of hell bad, so it's better than expected.

IF an author, blogger, whatever has some reason to put a good spin on what they write, whether it being the rose colored glasses or they have something they want to sell you, you have to kinda take it all with a grain of salt.

The math doesn't lie. People do, knowingly and unknowingly.

Edit minor spelling errors

[edit on 8/22/09 by redhatty]

Sorry for double posting, but thought this article deserved to bring this thread back up a bit

Figures released by the Treasury Department this week indicated that China reduced its holdings of Treasury securities by $25 billion in June, the most China had ever sold in a month.

...

China and Hong Kong, which is reported separately but is combined under China in the accompanying graphic, together covered more than half of the increase in the amount of Treasuries sold to the public — that is, to buyers other than United States government agencies like the Federal Reserve or Social Security — in 2006.

That share had fallen to 22 percent last year, when the government increased its public debt by a record $1.2 trillion. In the first half of 2009, China and Hong Kong acquired only 9 percent of the more than $800 billion worth of Treasuries that were sold.

...

The charts reflect ownership of Treasuries by China and Hong Kong, Japan and four other countries — South Korea, Singapore, Taiwan and Thailand — since 1994. On a dollar basis, the holdings are increasing, but their share of outstanding Treasuries has stopped growing.

www.nytimes.com...

Also cited in www.businessinsider.com...

Well established for the past 3mo or so: foreign appetite for US debt is on the wane , but the weighting between long & short term debt holdings oscillates on a monthly basis. In June , the bias reversed , favoring longer-term maturities (10 - 30yr).

China cuts Treasury holding to fund foreign deals

Not all the June sales of U.S. Treasuries were turned into cash. Half the sales of $51.8 billion short-dated debt were rotated into longer-dated maturities, indicating that Beijing now cares more about yield and worries less about the safety of its investment, reversing an earlier trend of reducing the average life of the holdings.

Full Text

US stops reliance on short-term debt

Indirect bidders bought 45.7 per cent of the US$23 billion in 10-year notes sold just before the conclusion of the Fed's policy meeting. They bought 48.1 per cent of the record US$15 billion in 30-year bonds sold the next day, higher than the average of 32.8 per cent at the past 10 auctions.

Full Text

Related: China is Again Buying Long-Term U.S. Treasuries . . .

Word on the street is that the Fed is buying currency swaps from foreign fed banks who are then buying Treasuries by proxy. Money laundering at its finest.

Also read somewhere that during the 2nd quarter there was a 2.7 trillion infow into US Equities, but only 400 billion outflow from money market accounts. Care to guess where the other 2.3 trillion may have come from?