• 4 minutes Pompeo: Aramco Attacks Are An "Act Of War" By Iran
  • 7 minutes Who Really Benefits From The "Iran Attacked Saudi Arabia" Narrative?
  • 11 minutes Trump Will Win In 2020
  • 15 minutes Experts review Saudi damage photos. Say Said is need to do a lot of explaining.
  • 17 mins Iran Vows Major War Even If US Conducts "Limited Strikes"
  • 4 hours Shale profitability
  • 55 mins Memorize date 05/15/2018 cause Huawei ban is the most important single event in world history after 9/11/2001.
  • 8 hours When Trying To Be Objective About Ethanol, Don't Include Big Oil Lies To Balance The Argument
  • 5 mins Hong Kong protesters appeal to Trump for support.
  • 2 hours Europe: The Cracks Are Beginning To Show
  • 11 hours Ethanol, the Perfect Home Remedy for A Saudi Oil Fever
  • 16 hours Let's shut down dissent like The Conversation in Australia
  • 10 hours One of the fire satellite pictures showed what look like the fire hit outside the main oil complex. Like it hit storage or pipeline facility. Not big deal.
  • 16 hours A little something for all you Offshore swabbies
  • 18 hours New designs will reduce transport fuels consumption
  • 4 hours LA Times: Vote Trump out in 2020 to Prevent Climate Apocalypse
  • 20 hours Democrats and Gun Views
  • 2 hours US and China are already in a full economic war and this battle for global hegemony is a little bit frightening
  • 7 hours Yawn... Parliament Poised to Force Brexit Delay Until Jan. 31
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
Download on the App Store Get it on Google Play