The Bond Market: Demand for U.S. Assets at Record Highs

Despite concerns on the gradual weakening of the greenback, the expanding U.S. deficit, and doubts surrounding the nation’s triple-A credit rating, the bond market shows international demand for U.S. financial assets is as high as ever.

From Bloomberg: The Federal Reserve’s holdings of Treasuries on behalf of central banks and institutions from China to Norway rose by $68.8 billion, or 3.3 percent, in May, the third most on record, data compiled by Bloomberg show. The Treasury said bidding from foreigners was above average at its $101 billion of note auctions last week.

The purchases by foreigners show that, at least for now, there’s little chance of buyers abandoning the U.S. or threatening the dollar’s status as the world’s reserve currency.

“The U.S. Treasury market is the widest, deepest, most actively traded market in the world,” said Jeffrey Caughron, an associate partner in Oklahoma City at The Baker Group Ltd., which advises community banks investing $20 billion of assets. “There’s really no other game in town.”

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