Posts filed under “Fixed Income/Interest Rates”

In Long-Term American Treasury Securities They Trust

What does it mean when so many overseas investors — governmental, corporate, and institutional — are hungry for US paper?

There are a variety of potential explanations: Yield is relatively attractive here, its a safe investment for those looking to move cash away from their native countries. For exporters, buying US Treasuries helps pressure rates down, thus financing additional consumer spending. Floyd Norris writes: "The vast majority of foreign Treasury purchases came from private foreign investors, who presumably were attracted by the yields and by the fact that the dollar gained in 2005 against the Japanese yen, the euro and the British pound, while falling less than 3 percent against the Chinese yuan."

The United States is politically stable (despite red/blue divisions); Nor does it hurt that we have an unblemished track record of paying our sovereign debts — even with all of the economic imbalances of recent years or the past. 

Here’s what the past 3 decades of foreign purchases looks like:

click for bigger graph


courtesy NYT


Here’s the details, via Norris:

"GUESS who’s financing the budget deficit of the United States? Hint: Very few Treasury securities are being purchased by American consumers or businesses.

The federal government released its calculations this week on net investments in United States long-term securities, and found that foreigners had invested $350.8 billion in Treasury bonds and notes in 2005. They were net sellers of short-term Treasury bills, so their total Treasury holdings grew by just $290.9 billion.

Even so, the United States Treasury says that Treasury securities held by the public — that is, by everyone except the Federal Reserve System and other arms of the government — rose by $306.4 billion. That means that 95 percent of the deficit was financed overseas.

Actually, foreigners are becoming a little less generous. In 2004, they bought $357.8 billion of Treasuries, 98 percent of the growth in outstanding Treasury securities. Over all, foreign investors bought a net $1.05 trillion in long-term American securities in 2005, the first time the number had gone to 13 figures. That was up 14 percent from 2004.

The gain last year showed increasing foreign trust in American corporations. While United States government and agency securities got most of the money, the increase largely came from a greater willingness to buy corporate bonds and stocks. Foreigners put a net $391.7 billion into corporate bonds, 27 percent more than they had invested the previous year and the largest amount for any year on record."

Let’s hope they don’t change their collective minds anytime soon . . .


In Long-Term American Treasury Securities They Trust
NYT, February 18, 2006

Category: Fixed Income/Interest Rates

The Risk to Equities from Rising Rates

Category: Federal Reserve, Fixed Income/Interest Rates, Investing

Chart of the Week: 10 year Treasury 1974-2006

Category: Federal Reserve, Fixed Income/Interest Rates

Inversion Redux

Category: Economy, Fixed Income/Interest Rates

Bill Gross Bond Timing Tool

Category: Economy, Fixed Income/Interest Rates

Category: Federal Reserve, Financial Press, Fixed Income/Interest Rates

What Worries Bill Gross . . .

Category: Fixed Income/Interest Rates

Fed Minutes

Category: Federal Reserve, Fixed Income/Interest Rates, Inflation

A World of (mostly) Flattening Yield Curves

Category: Economy, Federal Reserve, Fixed Income/Interest Rates, Inflation

2 Studies on the Flattening Yield Curve

Category: Federal Reserve, Fixed Income/Interest Rates, Inflation, Technical Analysis