Monday, June 15, 2009

The Debts of the Lenders: Russia Talks Up the Dollar But Shows Its Hand in TIC Data

Apparently, the G8 DID do something this weekend. They decided to back the dollar. At least verbally. But actions speak louder than words.

Russia's Finance Minister Kudrin verbally supported the dollar w/such calming statements as "it’s too early to speak of an alternate [currency]” and said the dollar "is in good shape."

However, let's take a look at what foreign central banks have been doing in the long term end of the Treasury curve.

The TIC data was: 11.2 Billion (actual) vs 58.1 B (forecast)

Here are the hard figures:

US analysts were hoping that foreign central banks would continue buying longer term treasuries. Instead, they mostly just sat on their hands. You can look at this as dollar positive in that there was no major selling. But foreigners dont need to sell to put renewed downward pressure on bonds. All they have to do is stop buying or slow down their rate of buying.

And judging by the 2 - 30 spread (still historically high), few are willing to lend money to the US govt for 30 years for single digit returns - and payable in the borrower's own currency.
blog comments powered by Disqus

Blog Archive