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Foreign Central Banks Set Purchase Record In Return to Treasury Market – Professional Edition

Wall Street’s “bond kings” have loudly proclaimed the worst and most dangerous bond market conditions they had ever seen, but foreign central banks (FCBs), who are not moved by such proclamations, clearly weren’t listening. Last week they added the largest amount to their holdings of Treasuries at the Fed in the 12 years that the Fed has been publishing this data. Demand surged at Treasury Auctions as other investors joined FCBs in returning to the table. Sentiment toward the European crisis, which had been complacent for several months, suddenly turned negative again and once again, capital fleeing Europe apparently sought safe haven  in the US Treasury market. Primary Dealers also returned to net buying after a month of heavy selling.

Treasury supply is likely to be restrained as tax collections continue to surge and spending looks all but certain to be cut. The Fed continues to buy more than enough paper to finance more than 100% of new Treasury issuance, leaving funds left over for dealers to deploy elsewhere. The return of heavy foreign central bank buying also removes supply from the market, as the FCBs almost never sell. This could be bullish for both bonds and stocks.

This report shows these forces in charts and analyzes what they mean for the short term and longer term outlook for the bond market and stock prices. This is essential information for investors and traders who want to understand  the forces that drive market trends.

Table of Contents

Treasury Auctions
Week Just Completed
Week Ahead
Treasury Auction Takedowns By Investor Class
Primary Dealer Treasury Holdings
Bond Fund Flows
Bank Holdings of Treasuries
Federal Government Cash Flows
Economic Data Schedule
10 Year Treasury Yield
US($) Dolor Index

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Lee Adler

I’ve been publishing The Wall Street Examiner and its predecessor since October 2000. I also publish, and was lead analyst for Sure Money Investor. I developed David Stockman's Contra Corner for Mr. Stockman. I’ve had a wide variety of finance related jobs since 1972, 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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