Smart Money Sells U.S. Treasuries

One of the world’s largest and most respected bond funds announced Wednesday it had reduced its exposure to U.S. government securities to zero in light of rising yields, which are inversely related to a bond’s value.

Given the right’s refusal to accept tax increases and the left’s refusal to reduce spending, this move is frightening, but no surprise. When the Fed stops buying U.S. Treasuries in June, it is questionable whether future U.S. Treasury buyers will still be willing to fund U.S. debt.

It looks like the market has voted on its assessment of the United States government’s financial health (not healthy). As yields continue to rise, financing America’s spending binge will become increasingly expensive. It is time to cut spending (and increase taxes), before our debtors force the country to take much more draconian measures.

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About Sean Patrick Hazlett

Conservative clean energy crusader, national security hawk, financial analyst, engineer, and former military officer.
This entry was posted in Business, Finance and Economics, Investing, Policy, Politics and tagged , , , , . Bookmark the permalink.

3 Responses to Smart Money Sells U.S. Treasuries

  1. I’m never one to say the sky is falling, but this is scary, scary stuff. Are there any leading indicators that can be trusted right now?

  2. Well, here is the flip side.

    If PIMCO liquidated its bonds, that means it now has a ton of cash. This means that PIMCO is long on the dollar but short on U.S. government debt. I guess they think that the dollar will appreciate relative to other currencies because yields on government bonds will be going up.

    Now if PIMCO transfers this cash to another currency, then the sky really is falling. My understanding is that they are holding it in dollars for the time being.

  3. SPH, that’s what I read also, so its not all negative on the US economy.

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