Treasury Market Declining Demand and Mispositioned Dealers Will Become Problem For Stocks

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We’ve already covered that fact that the supply of Treasuries will increase in 2018 as a result of the tax cut package and the fact that the Treasury needs to sell new debt to raise the cash to pay off the Fed when it redeems holdings under its program to shrink its balance sheet.

Meanwhile, the demand for Treasuries has been declining. This is a lethal combination for the bond market. We’ve been expecting this for months, and we’ve started to see the impact on the bond market in recent weeks.

One of the most important factors has been the fact that the Primary Dealers continue to be mispositioned. They are suffering losses as a result.

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Lee Adler

I’ve been publishing The Wall Street Examiner and its predecessor since October 2000. I also provide analysis and charts for David Stockman's Contra Corner which I developed for Mr. Stockman. I’ve had a wide variety of finance related jobs in the past 44 years, including a stint on Wall Street in both analytical and sales capacities. Prior to starting the Wall Street Examiner I worked as a commercial real estate appraiser in Florida for 15 years. I also worked in the residential mortgage and real estate businesses in parts of the 1970s and 80s. I have been charting stocks and markets and doing analytical work since I was a teenager. My perspective is not of the Ivory Tower. It is from having my boots on the ground and in the trenches of the industries that I analyze and write about today. 

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