Who buys US Treasuries after taper?
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Posted 24/02/2014
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As a reminder, Quantitative Easing ‘prints money’ by buying US Treasuries and Mortgage Backed Securities. China is the largest external holder and we reported Friday how they just sold a record amount and are on record saying they want to slow buying. In 2013 the US Fed bought 150% more Treasuries themselves then the rest of the world. The graph below shows demand for US Treasuries at its lowest level since the GFC. What does this suggest? That apart from the faltering US economy there is another reason why tapering looks temporary – no one else wants to buy their Treasuries. Gold and silver prices are rallying even WITH tapering… Imagine what could happen if they reverse it….