Investors Spooked at Specter of Central Banks Halting Bond-Buying Spree
- 6 years ago
Investors Spooked at Specter of Central Banks Halting Bond-Buying Spree
Bond markets appeared to be further spooked on Wednesday by a report
that China’s central bank, which owns $1.2 trillion in United States Treasury bonds, may be poised to slow or even halt its buying of United States debt.
“The market is very vulnerable to any change in supply and demand.”
That vulnerability has been on display in recent weeks, with many investors selling out of their bond positions, pushing the yield — which rises
as bond prices fall — on the benchmark 10-year United States Treasury bill up to a high of 2.59 percent on Wednesday from 2.3 late last year.
The rising yields led Bill Gross of Janus Henderson, whose renown as a bond investor came to define the multidecade bull market for fixed-income
securities, to pronounce the start of a bear market for bonds, although he said on Wednesday that he did not foresee drastic losses.
Nevertheless, the mere thought that China might choose to unload some of its Treasuries fed broader concerns about how the markets react as central banks in the United States, Japan
and Europe normalize policies adopted to prop up faltering economies
Now, investors are starting to worry about what would happen if the richest nations start to scale back on a buying binge
that most of them began to stimulate economies hurt by the global financial crisis.
Not only would such a step hurt China by decreasing the value of its bond holdings, it would wreak havoc in a global economy
that the country is now fully integrated into through deep trade and financial links.
“Your largest investor might be stepping back, that’s what spooked people,” said John Briggs, a bond strategist at NatWest Markets.
Bond markets appeared to be further spooked on Wednesday by a report
that China’s central bank, which owns $1.2 trillion in United States Treasury bonds, may be poised to slow or even halt its buying of United States debt.
“The market is very vulnerable to any change in supply and demand.”
That vulnerability has been on display in recent weeks, with many investors selling out of their bond positions, pushing the yield — which rises
as bond prices fall — on the benchmark 10-year United States Treasury bill up to a high of 2.59 percent on Wednesday from 2.3 late last year.
The rising yields led Bill Gross of Janus Henderson, whose renown as a bond investor came to define the multidecade bull market for fixed-income
securities, to pronounce the start of a bear market for bonds, although he said on Wednesday that he did not foresee drastic losses.
Nevertheless, the mere thought that China might choose to unload some of its Treasuries fed broader concerns about how the markets react as central banks in the United States, Japan
and Europe normalize policies adopted to prop up faltering economies
Now, investors are starting to worry about what would happen if the richest nations start to scale back on a buying binge
that most of them began to stimulate economies hurt by the global financial crisis.
Not only would such a step hurt China by decreasing the value of its bond holdings, it would wreak havoc in a global economy
that the country is now fully integrated into through deep trade and financial links.
“Your largest investor might be stepping back, that’s what spooked people,” said John Briggs, a bond strategist at NatWest Markets.