Metals Minute 150: Treasuries in Turmoil
I hope you and yours can enjoy the holiday today. With the U.S. bond market closed today, there is a growing awareness of difficulties in the treasury markets. Several large governmental and corporate purchasers of U.S. Treasuries have stepped back from being willing purchasers. In the nearly $24 Trillion market for treasuries, it is rare to have so many pulling back simultaneously. Even the Federal Reserve is currently trying to reduce its balance sheet, and they were often considered the "buyer of last resort."
Due in large part to the strength of the dollar in international currency markets, nations like Japan are having to intervene to support their own currency and bond market by selling U.S. assets. Ironically, the Fed's record rates of interest rate increase are driving foreign capital away from US treasuries as they try to stabilize their currencies. Normally higher interest rates act as a draw. This time the draw may have to come from American citizens; we will see how it plays out.
Lots of data is coming out this week - PPI on Wednesday, CPI, and 2023 COLA numbers on Thursday; my estimate is a COLA of 8.73%, +/-.