(New York)

One of the big worries in the Treasury market is that foreign demand is waning for Treasury bonds at the same time as supply is surging. This is leading many to stress that US government bond prices could be in for a big fall. However, Bloomberg says that won’t happen. The logic just isn’t there, and neither is the data to back it. Inflation and rates are rising, and so is the Dollar, making the bonds more attractive to hold. Further, US yields and credit-worthiness are looking increasingly positive given the bond market turmoil in Europe.

FINSUM: Because the Dollar is still the dominant world currency, there is a lot of built-in demand for Treasuries. And given the state of US yields versus the rest of the developed world, we don’t think foreign demand is going to shrink.