Thursday, 26 March 2009

Buyers of US Five Year Treasuries are sinking

The hourly chart above shows that anyone buying the Five Year US Treasury Note after the QE announcement last week would have been losing money consistently ever since.
In addition the Treasury auction yesterday, which I alluded to in this column, did not go terribly well and adds further supply concerns to the sovereign credit market.

The US Treasury may have its worries about its refunding requirements this year with an estimated $2.5 trillion worth of bonds that need to find buyers but their problems are much less acute than those for the UK government where an auction yesterday for 40 year gilts was under-subscribed.

Coming on the heels of contradictory positions emerging between Prime Minister Brown and the Governor of the Bank Of England, with regard to future fiscal stimulus measures, the UK has to be careful how it steps in the global capital markets. It does not have the benefit of issuing Treasury paper in the global reserve currency as the US does (at least for the time being!) but that’s a story for another day.

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