SHUTDOWN FEARS! Fed Dumps $840B in Bonds, Japan & China May Sell Off U.S. Bonds too.｜AsianQuickTake

Welcome to Asian QuickTake with Jacob. In this episode, we delve into the concerning events that unfolded in the U.S. Treasury market on October 26. The results of the 5-year U.S. Treasury auction have raised red flags, as yields hit their highest levels in over a decade, triggering turbulence in the bond market.

The $52 billion 5-year U.S. Treasury issue was priced at a high yield of 4.899%, well above the previous month's rates and signaling ongoing pressure on the U.S. Treasury market. With an unsatisfactory bid, this auction did not bode well for market stability. Indirect trades have also dipped significantly, underlining the challenge facing U.S. Treasuries.

As yields on 10-year Treasury notes approach the crucial 5.00% threshold, the U.S. government's massive deficit in 2023, which is expected to be the third-largest on record, further complicates the situation.

The rapid increase in U.S. debt has been staggering. As Bank of America notes, interest rates are on the rise, and U.S. Treasury issuance is likely to reach record highs in 2024, placing further pressure on the market.

The Federal Reserve's actions have added to the complexity, as they've initiated rate hikes and a tapering program. The Fed's reduced holdings of U.S. Treasuries have ramifications, making it a counterparty to the U.S. Treasury.

Global factors also come into play, with Japan and China holding significant positions in U.S. debt. Market participants need to closely monitor these developments, as they impact the future of the U.S. Treasury market.

It's a complex scenario, with profound implications. As we navigate these challenging times, we encourage you to like this video, subscribe to our channel, and turn on notifications to stay updated on critical matters in business, international relations, and geopolitics that are shaping our world.




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