Overseas creditors such as China and Japan enabled the U.S. to spend its way out of the recession as they gobbled up 80 percent of the nation’s Treasuries. Now, their holdings are dropping toward the lowest level in a decade, while homegrown investors have picked up the slack.
The Canadian dollar reached a four- year low for a second day on speculation the nation’s central bank may signal at a meeting next week the need for lower interest rates amid faltering economic growth.
Five years after Federal Reserve Chairman Ben S. Bernanke dropped U.S. interest rates toward zero to end the worst economic crisis since the Great Depression, America’s financial markets have become the envy of the world.
The worst first half for Treasuries in four years has wrung the unprecedented Federal Reserve stimulus out of bond prices as investors now look to low inflation and slow economic growth to contain yields.
U.S. government bonds are acting more like equities than any time since before the credit crisis, making Treasuries a hidden risk to investors becalmed by the prospect of the Federal Reserve prolonging stimulus into 2014.