“As the U.S. government kicks off its debt sales this year, here’s one potentially worrisome sign for traders to keep in mind: the steep decline in demand at its bond auctions.”
USAGOLD note: It is a lingering concern in the bond market that, as U.S. government needs elevate, the supply will exceed demand. We have reported here in the past of China and Japan’s withdrawal from the market as buyers. In the absence of new buyers, the responsibility for financing the U.S. sovereign debt will likely fall principally on American buyers. It is difficult to know now what happens if the “steep decline” in buyers’ interest continues and/or deepens. The chart below details the additions to the U.S. quarterly year over year. As you can see, as of the third quarter of last year, the numbers, though climbing, had not reached levels comparable to the 2008 financial crisis. What preoccupies bond traders is what happens if/when they do?
Repost from 1/10/2019