NEW YORK (TheStreet -- Foreign investors have been dumping U.S. government bonds at a heady pace over the last month.
According to the government's latest Treasury International Capital report, foreign governments sold $23 billion in treasuries last week and $69 billion over the past four weeks.
Despite the selling, yields on the 10-year bond have slipped to 1.88% Friday afternoon. Treasuries trade inversely so as the yields drop - the prices rise, which make it all the more odd that foreigners would be unloading treasuries at a time when their value is increasing."Let's face it, a greater portion of the U.S. debt is held outside of this country than ever before," said Stephen Guilfoyle, an economist at Meridian Equity Partners. "That said, come year's end, I don't know how much of a surprise it should be that anyone, including foreigners would be liquidating assets. That goes especially for the cash strapped." The TIC report doesn't define which foreigners are selling, so it becomes a guessing game but the logical conclusion is the Chinese. They own $1.12 trillion, but they sold 3% of their holdings in August following the downgrade by the S&P. However, this hasn't been a logical year for trading, so the next guess is the Europeans. European banks are hoarding cash following European Central Bank's long-term refinancing operation last week. The latest ECB data showed 445 billion euros deposited in the central bank's overnight facility on Thursday, up from 436 billion euros the day before. U.S. treasuries remain in heavy demand with a sale on Dec. 20 drawing bids for a record 9.07 times the amount offered. And it's a good thing that demand is so strong because the U.S. debt will be within $100 billion of the government's limit by the end of Friday. The picture isn't expected to change anytime soon. Kathy Jones, fixed income strategist at Charles Schwab said in commentary on Friday: "We look for Treasury yields to remain low and the yield curve to remain steep in the second half of the year." Meridian Equity's Guilfoyle added: "The selling of U.S. debt by foreigners leaves us at a still very high level of foreign ownership historically. Now, if it was China, then we have to keep our eyes on it." --Written by Debra Borchardt in New York.
>To contact the writer of this article, click here: Debra Borchardt. >To follow the writer on Twitter, go to http://twitter.com/wallandbroad. >To submit a news tip, send an email to: firstname.lastname@example.org.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV