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hamilchr
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The Belgian Connection

- Peter Schiff - Euro Pacific Capital

Maybe the easiest way to understand why yields are falling in the US (and globally) is a simple short squeeze.

$17.5 T in total Treasury debt...$5 T intra-gov debt. $2.5 T in bills (aka, cash held by banks) So, Public Note / Bond market is $10 T

Fed already owns $2.5 T in Note/bonds...still buying $25 B /mo, and continue rolling over existing.

"Foreigners" own $5 T in Note/bonds...they aren't selling and so far continue rolling over existing.

This means all Domestic holders of Treasury Note/Bond debt (ex-Fed) hold roughly $2 - 2.5 T...they have not been buying and have not been rolling over their Notes/Bonds yielding next to nothing and sell as they come due. And Treasury is creating less than half the new debt as per previous 5yrs.

So, put it together, declining new issuance, Fed buying less but their buying has more impact since there is declining new issuance. And hardly any non-new issuance supply left...Fed/Foreigners are primarily buying the rollover stock previously held by domestics (states, pensions, insurers, etc. who cannot afford to buy Treasury's when their plans assume 7-8% returns).

Commented 3794 days ago

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Beginning of the headline :One of the biggest questions at the end of 2013 was how the Treasury market would react to the reduction of bond buying that would result from the Federal Reserve's tapering campaign. If the Fed were to hold course to its stated intentions, its $45 billion monthly purchases of Treasury bonds would be completely wound down by the fourth quarter of 2014. Given that those purchases represented a very large portion of Treasury bond issuance at that time, it was widely assumed by many, me in particul... Read More

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