Beware the Foreign Exodus From Treasuries

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Things are changing quickly right now socially, politically, and economically. There are big time shifts happening in world debt markets and these shifts will likely impact the lives of everyday Americans in the coming year.

(From Bloomberg)

The biggest foreign buyers of U.S. government bonds are quickly retreating after years of absorbing record amounts of the securities.

This is an important dynamic to understand when looking at the potential fate of the $13.6 trillion Treasury market in 2017. It’s hard to see how these bonds can significantly rally, even in the face of bad news, given the exodus of foreign central banks from the U.S. government-debt market…

…But this backdrop of foreign selling is important. Yields on 10-year Treasuries may not quickly shoot up, but they most likely won’t plunge back to the lows of 1.36 percent seen in July. Those days of ultra-low U.S. yields seem to be over, regardless of whether Trump sticks to his promises and is able to carry out his policies in short order or not.

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