Net Foreign Purchases Report
This morning, what seemed to be good news... The dollar strengthened against the euro (1.3312) after the Treasury released a TICS report that showed a hefty $91.5 bln run-up in foreign holdings of US securities in Jan. versus Street expectations in the neighborhood of $58.5-59.0 bln. This is the second highest level ever and temporarily mitigated worries about foreigners' willingness to finance the U.S. current account deficit. The foreign-holdings report ``improves the tone'' on the dollar, said Robert Lynch, a currency strategist at BNP Paribas in New York. ``There is potential for the dollar to improve.'' Lynch said the dollar may rally to $1.3230 in coming days.
Meanwhile, upon further review...treasurys have recently fallen to new intraday lows, lifting yields on the 10-year note (-6/32) even further above the psychological 4.5% level... Bonds have erased early gains upon further analysis of this morning's TICS report that, while a substantial jump in foreign investment in U.S. government debt was realized, the largest increase did not come from the central banks typically responsible for financing the U.S. current account deficit. The biggest net increase of U.S. assets by foreigners, were in holdings of Treasury securities and in government agency bonds, the Treasury department said. Most of the gain in Treasuries came from Caribbean buyers, which analysts tie to hedge funds. Japan's holdings fell by the most since 2000.
So Japan is buying less and the hedge funds are loading up on treasuries, no surprise here. The dollar is down, while bonds are getting beaten down, this is not natural. The hedgsters are causing distortions in the markets. Which explains why recently, the dollar and bonds have both moved together rather than contrary to each other.
The dollar is down 1.2 percent against the euro this month on concern Asian central banks will slow purchases of U.S. assets. Investors in Japan, China and South Korea -- three of the five biggest foreign holders of U.S. debt -- held a total $974.6 billion in Treasury notes at the end of last year, Treasury Department figures show.The U.S. needs to attract about $1.8 billion a day to compensate for the record current account and maintain the value of the dollar, according to Bloomberg calculations.
Tomorrow the government reports the current account deficit for the fourth quarter, which may have increased to a record $182.8 billion, according to the median forecast of economists polled by Bloomberg. The current account is a gauge of trade, services, and some investments. The Commerce Department will release fourth-quarter figures tomorrow.
Bloomberg
Meanwhile, upon further review...treasurys have recently fallen to new intraday lows, lifting yields on the 10-year note (-6/32) even further above the psychological 4.5% level... Bonds have erased early gains upon further analysis of this morning's TICS report that, while a substantial jump in foreign investment in U.S. government debt was realized, the largest increase did not come from the central banks typically responsible for financing the U.S. current account deficit. The biggest net increase of U.S. assets by foreigners, were in holdings of Treasury securities and in government agency bonds, the Treasury department said. Most of the gain in Treasuries came from Caribbean buyers, which analysts tie to hedge funds. Japan's holdings fell by the most since 2000.
So Japan is buying less and the hedge funds are loading up on treasuries, no surprise here. The dollar is down, while bonds are getting beaten down, this is not natural. The hedgsters are causing distortions in the markets. Which explains why recently, the dollar and bonds have both moved together rather than contrary to each other.
The dollar is down 1.2 percent against the euro this month on concern Asian central banks will slow purchases of U.S. assets. Investors in Japan, China and South Korea -- three of the five biggest foreign holders of U.S. debt -- held a total $974.6 billion in Treasury notes at the end of last year, Treasury Department figures show.The U.S. needs to attract about $1.8 billion a day to compensate for the record current account and maintain the value of the dollar, according to Bloomberg calculations.
Tomorrow the government reports the current account deficit for the fourth quarter, which may have increased to a record $182.8 billion, according to the median forecast of economists polled by Bloomberg. The current account is a gauge of trade, services, and some investments. The Commerce Department will release fourth-quarter figures tomorrow.
Bloomberg
Comments