Low Yields Could Also Prove ‘Transitory,’ Buying Patterns Signal
- Hedge funds, unregulated money are key: Oxford Economics
- Exit of short-term investors could hit bonds, Tolosa writes
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Federal Reserve Chairman Jerome Powell describes the latest bout of low inflation as caused by “transitory” factors. If he’s right, U.S. Treasuries may be particularly vulnerable to a sell-off, according to an analysis of who’s been buying them lately.
Even after the Fed stopped accumulating Treasuries in 2014, continued asset purchases by global central banks sustained an “artificial” base of support for the securities by pushing investors in Europe and elsewhere into American government debt, according to Oxford Economics. That largely ended last year, as the European Central Bank and Bank of Japan tapered their quantitative easing alongside the Fed’s balance-sheet reduction.