No longer. Brad Sester shows why Treasury rates are rising now—central banks reduced their demand for long-term Treasuries, leaving private borrowers to pick up the slack.
Over the last 12 months of data (data through the end of April, May data will be out soon), the US issued $735 billion of notes, bonds and TIPs.* In calendar 2008, the increase in supply of longer-term Treasuries was about $400b – a large sum, but easily within the realm of historical experience.It's a situation that will only grow worse in the coming months and years. ProsShares Ultra Short Barclays 20+ Year Treasury (TBT) is one of the few ways to profit from the trend.
Yet even as the supply of notes has increased, central bank for longer-term Treasuries for their reserves has fallen. Central bank demand for longer-term Treasuries – on a rolling 12m basis – has been trending down since August 2008.
Here's an article discussing potential crowding out in China.
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