US 10-year yield rose for the second consecutive week, but this was only sufficient to push it back into the lower end of the old 2.80%-2.95% range as the safe-haven bid may have diminished in recent days, according to analysts at BBH. 

Key Quotes

“The media and policymakers seem ambivalent about foreign ownership of US Treasuries.  On the one hand, the fact that foreign participation appears light at the recent auctions is disconcerting for some.”

“On the other hand, we are told that foreign officials buy US Treasuries so that their currencies do not have to appreciate and they can reap more of the benefits from trade. Others spin dark fantasies weaponizing large holdings of US Treasuries, such as China’s, or in the past, Japan’s which remain nearly as large.   At the same time, the deficit is growing and projected to be around 4% of GDP this year and 5% next year, suggesting strong US borrowing needs.”

“The June 10-year note futures contract has been heavy for the past two weeks, and the poor close before the weekend suggests further losses are likely in the days ahead.  The contract closed below the 20-day moving average for the first time since March 21, and the five-day moving average is set to cross below the 20-day.  However, it is still drifting in a fairly narrow range of 120-121.  Bond market volatility (MOVE) is at three-month lows.”


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