The Fed is buying US Treasury bills at a faster pace than during Covid. Scott Bessent will do whatever he can to prevent bond yields from soaring. Foreign holdings of US Treasuries fall in June, led by Japan, UK, China…

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Bill buying and verbal support are not stopping the 30-year from making new cycle highs.




What rising Treasury yields are telling us

Yields on U.S. government bonds — known as Treasurys — continue to climb, thanks to groaning federal deficits, bonkers corporate borrowing and uncertainty about monetary policy under Federal Reserve chairman Kevin Warsh.

Why it matters: Virtually all borrowing costs — for mortgages, business loans, auto financing, etc. — are based in part on bond yields produced by trading in the Treasury market each day.

When the U.S. government has to pay higher interest rates to borrow — yields are effectively those interest rates — it raises the floor for almost everyone else too, increasing borrowing costs across the economy.
Threat level: If yields go too high, these rising rates discourage economic activity, boost unemployment and can even lead to a recession.

How it works: Bond yields move in the opposite direction of bond prices.

So a pronounced rise in long-term yields on U.S. government bonds reflects a significant drop in prices for those bonds, or put another way, dropping demand from buyers.
The latest: Last week, investors required the highest yields in roughly two decades to buy some $67 billion in long-term U.S. government bonds.

The yield on the 30-year Treasury bond ended the week at 5.26%, the highest since June 2007, despite benign reports on consumer and wholesale price inflation. (This is unusual, as long-term yields tend to move lower when inflation becomes less of a worry.)

SELL AMERICA: Foreign holdings of US Treasuries fall in June, led by Japan, UK, China…

* Japan holdings fell to $1.116 trillion in June, down 2.3%, from May’s level of $1.143 trillion. It remained the biggest non-U.S. holder of U.S. Treasuries, with holdings hitting a peak of $1.325 trillion in November 2021.

* The United Kingdom, the second-largest foreign holder of Treasuries, showed a 1% decline in holdings to $939.9 billion in June from $948.6 billion the previous month. The UK is widely viewed as a major custody hub for global investors and its flows are often seen as a proxy for hedge fund positioning.

* China’s stash of Treasuries dropped 4% to $633.4 billion in June from $659.3 billion in May. China’s holdings in June were the lowest since September 2008, when holdings tumbled to $618.2 billion.

* China is still the third-largest non-U.S. holder of Treasuries. Its June holdings have declined by more than 13% on a year-on-year basis.

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