Tags: Global | Treasurys | safe | US

WSJ: Global Investors Hooked on Treasurys

By    |   Monday, 09 June 2014 10:34 AM

Treasurys are attracting demand from investors both domestic and foreign, as they seek a safe holding with a competitive yield.

Some foreign central banks are buying Treasurys as they invest the dollars they have acquired to depress their currencies and thus increase their exports, The Wall Street Journal reports.

U.S. commercial banks and savings institutions lifted their Treasury holdings to $237.2 billion in the first quarter, the highest since 1995, according to the Federal Deposit Insurance Corp.

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Meanwhile, China purchased a net $55.8 billion of Treasurys in the quarter, compared with an average of $20.3 billion in each quarter of 2013, according to the Treasury. The Chinese government has acted to weaken the yuan this year.

As for yields, the 10-year Treasury stood at 2.62 percent Tuesday morning. That's almost double the 1.37 percent rate for German 10-year government notes.

And it's not far from the 2.72 percent yield for Italian notes and 2.574 percent for Spanish paper. Those credits are much riskier than Treasurys, The Journal explains.

"Treasury bonds are a bargain, actually," compared with their German brethren, Christopher Sullivan, chief investment officer at the United Nations Federal Credit Union, told The Journal.

But as Treasury yields have risen in recent sessions, some are questioning the market's strength.

Mark Cernicky, managing director of fixed income at Principal Global Investors, PFG +0.80%, believes Treasurys might get some relief because of the gains of some European government bonds. In other words, as the yields on European continue to get closer to Treasury levels, investors will likely choose the safer bet . . . U.S. Treasurys.

"It is hard for the 10-year Treasury yield to rise above 3 percent if the 10-year yields in Spain and Italy stay below 3 percent," he explains.

"The overwhelming vote for the Treasury market is a bearish one," Thomas Tucci, head of Treasury trading at CIBC World Markets, tells Bloomberg.

The "ECB [European Central Bank] policy is still developing. Global growth forecasts are still relatively subdued."

Editor's Note: Secret Wall Street Calendar Uses Strange ‘Crash Alert System,’ Gets 18.79% Annual Returns

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InvestingAnalysis
Treasurys are attracting demand from investors both domestic and foreign, as they seek a safe holding with a competitive yield.
Global, Treasurys, safe, US
361
2014-34-09
Monday, 09 June 2014 10:34 AM
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