Thursday, April 29, 2021

"Yields have to rise and the dollar has to fall"

Thus sayeth Asia Times.
[more accurately, the Deputy Editor (Business) at AT]*

From Asia Times, April 30:

The worst thing to own right now is US bonds; meanwhile, the Chinese market looks attractive

Either the dollar has to fall or Treasury yields have to rise – or both. That’s the only way the US government can persuade the world to buy US$3 to $4 trillion of Treasury securities.

US prices are rising and the dollar is worth less in real terms. Bond yields will have to rise to compensate investors for inflation, or the price of US bonds to foreign investors will have to fall with the US currency.

The chart shows the steady decline of foreign holdings of US Treasuries since 2015. The rest of the world dumped Treasuries when they became expensive in currency terms: notably in late 2016 and early 2017, and again during 2019 and early 2020....


*As we've pointed out elsewhere, the author, David Goldman was one of those guys who couldn't keep a job:

  • Global head of credit strategy at Credit Suisse
  • Global Head of Fixed Income Research for Bank of America
  • Global Head of Fixed Income Research at Cantor Fitzgerald

I think one of his requirements for moving on was a "Global Head" title.

Now he's Deputy Editor (Business) at AT.