- The lukewarm demand for a 20 -year bond auction The treasury of the treasury that declined and declined the dollar was sent last week, amid fears related to the installation of the federal government’s ability to continue financing the massive deficit as Congress is looking to add trillion dollars in the red ink. For George Saravilus from Deutsche Bank, they are signs of “buyer’s strike” among foreign investors.
Foreign investors have begun to avoid American assets because the current financial deficit and dance in the field German bank.
In a recent note for investors, he commented on it The lukewarm demand for a 20 -year bond auction Last week, it ignited the sale of the cabinet, which led to the rise in revenues. But this was not the worst thing about it.
“The most disturbing part of the market reaction is that the dollar is weakening at the same time,” Saravilus wrote. “For us, this is a clear indication of the foreign buyer’s strike on American assets and the related US financial risks that we warn for some time. At the heart of the problem, foreign investors are no longer ready to finance the twin deficit in the United States at the present level of prices.”
The skiing in the bond market also comes when the US House of Representatives approved legislation to extend tax cuts from President Donald Trump’s first state in addition to a new addition, such as the lack of taxes on advice and additional work.
While legislators are also writing in some discounts in spending, they are more than compensation for the discounts in tax revenues in addition to increasing expenses in other places, such as defense. It will be the pure effect Tryns are more than dollars Added to the budget deficit during the next decade.
The Senate is expected to search for changes in the draft law of the House of Representatives, but tax cuts are a top priority for Republicans Trump and Congress.
Saravilus said that there are only two ways to restore the attractiveness of American assets for foreign investors.
He wrote: “The United States must review the current reconciliation bill in Congress to lead to a more compact financial policy; or, the non -international value of American debt must decrease financially in order to become cheap enough to return to foreign investors.”
Another opposite of American assets is customary Drama market bonds in JapanIt faces a financial crisis of confidence and the return as well.
The largest bearer abroad has a mountain of its debts just as its economy began to shrink, as Prime Minister Shigro Ishiba says that the financial situation of Japan is “worse than Greece.” On Monday, the return on its highest levels in Japan has achieved unprecedented in About 20 years old.
But for Saravilus, the highest revenue for Japanese government bonds is not a reflection of the financial concerns about the government in Tokyo. If this is the case, the yen will be sold. Instead, the yen rose against the dollar, indicating less participation in the market for American debt.
“It can be said that the sale of JGB is a greater problem for the US Treasury Market: by making Japanese assets an attractive alternative to local investors, it encourages more investments from the United States,” Saravilus explained in a separate note this week.
What Japanese investors do is very important in the bond market as the latest Official American data It showed that Japan’s US debt’s possessions rose to $ 1.13 trillion in March – and a quarter of a quarterly GDP.
Meanwhile, China was falling out of treasury bonds, which decreased to $ 765 billion at the end of March from 784 billion dollars in the previous month. This pushed China to the bottom of the list as the third largest holder of the United States Treasury, with the UK crossing to become No. 2.
“At the core of our views in the coming months, the market has become increasingly driven by the positions of external assets, and this puts down pressure on the American bond and US dollar markets,” said Saravilus.
This story was originally shown on Fortune.com
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