• 4 minutes Is The Three Gorges Dam on the Brink of Collapse?
  • 8 minutes The Coal Industry May Never Recover From The Pandemic
  • 11 minutes China Raids Bank and Investor Accounts
  • 7 hours In a Nutshell...
  • 1 day Is OilPrice a cover for Green Propganda
  • 4 hours During March, April, May the states with the highest infections/deaths were NY, NJ, Ma. . . . . Today (June) the three have the best numbers. How ? Herd immunity ?
  • 10 hours Putin Paid Militants to Kill US Troops
  • 7 mins Why Wind is pitiful for most regions on earth
  • 1 day Victor Davis Hansen on Biden's mental acuity " . . unfit to serve". With 1 out of 5 Democrats admitting it. How many Dem's believe it but will not admit it?
  • 14 hours Putin Forever: Russians Given Money As Vote That Could Extend Putin's Rule Draws To A Close
  • 16 hours Happy 4th of July!
  • 14 hours Apology Accepted!
  • 1 day Tesla Model 3 police cars pay for themselves faster than expected, says police chief
  • 2 days The Political Genius of Donald Trump
  • 3 days Per most popular Indian websites it was Indian troops not Chinese troops breach of LAC that caused the clashes. If you know any Indian media that claim to the contrary please provide the link
  • 3 days Why Oil could hit $100
Dave Forest

Dave Forest

Dave is Managing Geologist of the Pierce Points Daily E-Letter.

More Info

Premium Content

Return of the Great Bond Conspiracy

The old saying goes that just because you're paranoid doesn't mean everyone else isn't in on it. It's starting to feel that may be true in the bond market.

For years (even decades) there have been theories about collusion between America and Asia in the government bond arena. Through the 1980s and 1990s, Japan supported America by buying Treasuries. And since 2000, China has stepped into that fray. Using its trade-earned dollar holdings to invest heavily in American paper.

The conspiracy camp says Asia has been brow-beaten by America into doing so. There is no sound business case for them to be investing in U.S. bonds.

The anti-conspiracy answer is that Asian nations are acting autonomously, based on their best analysis of the global investment landscape. They're not trying to help America, just to help themselves.

Recent data seems to argue for the former case.

There's been a lot of talk lately about the fate of U.S. government housing agencies like Fannie Mae and Freddie Mac. These agencies are in trouble, on the back of trillions of dollars in bad home loans. Everyone knows it, and lately the American government seems to be putting on a push to find a solution.

And incredibly, one seems to have emerged (at least a temporary one). But not from the U.S. government. From Asia.

Back in February, Japan began buying significant quantities of agency bonds. For the first time in over two years. Data released this week show that since February, Japan has snapped up over $30 billion in agencies.

US Securities

And just as before, what started in Japan is now spreading to China. In June (as announced this week), the Chinese picked up $5.6 billion in agencies. Bringing the nation's two-month total purchases to over $10 billion. The first significant Chinese agencies purchases since mid-2008.

Chinese Bond Purchasing

Buoyed by Asia, the overall foreign market for agencies is showing its first signs of life in a long while.

US Government Agency Bonds

Here's another interesting thing. It appears that foreign buyers have made a calculated decision to move out of Treasury bonds at the same time they move into agencies. In May and June, foreign net purchases of Treasuries came in at just $48 billion. One of the weakest showings in the last year.

US Treasury Bonds

Maybe U.S. agencies are looking like a good deal. Maybe Asia is a lot more savvy in the bond market than I am. But it sure looks like a coordinated bailout.

Here's to keeping an open, suspicious mind.

By. Dave Forest of Notela Resources


Download The Free Oilprice App Today

Back to homepage





Leave a comment
  • Anonymous on August 25 2010 said:
    Conspiracy my arse. Never attribute to malice what can be explained by stupidity or greed. Export reliant economies need someone to export to, and something to spend those Dollars on.As long as Asia can use our markets as dumping grounds for industrial output they will continue to spend our worthless Dollars on equally worthless Bonds (which are paid in yet more worthless Dollars) because A) there's not much other than Oil to spend them on and B) they know that continued access to the US of Walmart contingent on keeping the con-game going.

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News