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.
Treasuries snapped a three-day rally after a government report showed the economy added the most jobs last month since 2012, a sign that economic growth is poised to accelerate as the Federal Reserve pares monthly bond-buying and considers when to raise interest rates.
Treasury bonds rose for a second week, pushing the yield to the lowest level since June, as signs of uneven economic growth and escalating tension between Russia and Ukraine drove investors to the safety of U.S. debt.
For all the handwringing over the slowdown in the U.S. economy, the bond market shows there’s less risk of deflation now than before the Federal Reserve’s first two rounds of large-scale debt purchases.
Bond investors trying to divine when the Federal Reserve will reduce its unprecedented monetary stimulus are increasingly looking to the riskiest parts of the debt market, which are booming like before the financial crisis.