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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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This Week Will Tell If The Bear is Really Coming Out of Hibernation

Last week’s selloff did less damage than it may have felt like. The drop stopped in the area of 3 crossing uptrend lines, ranging in length from short term to long term. Here’s what would tell us whether the uptrend is still in force, or signal that something evil this way comes.

I have added 8 new stocks to the swing trade chart pick list, including 2 shorts.

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These reports are not investment advice. They are for informational purposes, for a broad audience of investment and trading professionals, and other experienced investors and traders. Chart pick performance changes week to week and past performance may not indicate future results, as you know. Trading involves risk, and these reports assume that you understand those risks and manage them according to your tolerance. 

Lee Adler

I’ve been publishing The Wall Street Examiner and its predecessor since October 2000. I also publish LiquidityTrader.com, and was lead analyst for Sure Money Investor, of blessed memory. 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 sales, analytical, and trading capacities. Prior to starting the Wall Street Examiner I was a commercial real estate appraiser in Florida for 15 years. I was considered an expert in the analysis of failed properties that ended up in the hands of bank REO divisions, the FDIC, and the RTC. Remember those guys? 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. I'm not some Ivory Tower academic, Wall Street guy. My perspective comes from having my boots on the ground and in the trenches, as a real estate broker, mortgage broker, trader, account rep, and analyst. I've watched most of the games these Wall Street wiseguys play from right up close. I know the drill from my 55 years of paying attention. And I'm happy to share that experience with you, right here. 

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