Peter Boockvar, chief investment officer at the Bleakley Advisory Group, adds another wrinkle to the dangers of an emerging trade war.
In a Monday morning email, Boockvar notes that foreigners were net sellers of U.S. notes and bonds for the second straight month in April. China and Japan were net sellers, leaving Japan now holding the lowest total of U.S. Treasuries since 2011, Boockvar says. And Russia responded to the U.S. imposing sanctions on some oligarchs by liquidating more than $47 billion worth of Treasuries, or nearly half its holdings.
Boockvar adds that foreigners have been net sellers of U.S. Treasuries since 2013. Their selling didn’t matter to the market a few years ago because the Federal Reserve was still buying voraciously, but that has now changed. The Fed is reducing its balance sheet and the pace of foreign selling increased in October.
“What is left is mostly domestic demand for US Treasuries, via pension funds, insurance companies and other funds,” Boockvar says.
His recommendation: “Start watching this data, even though it is somewhat dated when reported. We need all the help we can get in the search for buyers of US Treasuries due to the enormous supply coming our way in the next few years. Our stance on trade with our trading partners could very well play into this in coming months and quarters, especially with China, the largest owner of US Treasuries.”