Some Treasury Market Thoughts

May 21st, 2009 8:42 am | by John Jansen |

A constant theme of late has been the tremendous pile of cash which foreign central banks are plowing into the front end of the treasury market. One dealer offered several solid reasons for those important investment flows.

Central banks have some inflation fears and have no interest in the back end of the market.

Currency market intervention which results in central banks buying dollars and then need a place to invest them. The front end of the Treasury market is a worthy sanctuary.

According to one trader there has been some recent issuance by sovereign issuers and some of that money has found a parking spot in the front end.

The end of FDIC guaranteed issuance,which was a high yielding alternative to the Treasury market, has forced the central banks back into Treasuries.

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  1. 4 Responses to “Some Treasury Market Thoughts”

  2. By Don the libertarian Democrat on May 21, 2009 | Reply

    “The end of FDIC guaranteed issuance,which was a high yielding alternative to the Treasury market, has forced the central banks back into Treasuries.”

    What effect would extending these guarantees to riskier assets have on their viability for central banks? What is the FDIC Guarantee worth?

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  2. May 21, 2009: Brad Setser: Follow the Money » Blog Archive » China’s new barbell portfolio: Treasuries and commodities?
  3. May 22, 2009: Brad Setser: Follow the Money » Blog Archive » Central banks still (heart) dollar reserves
  4. May 29, 2009: New Jersey CFO » The basic story of China’s foreign portfolio is simple…..

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