Who is left to buy?
Anyone who owns Treasury bonds has to ask themselves that question. Or maybe a better question is, "Who's stupid enough to buy?"
The yield on the 10-year Treasury note dipped below 3% last week. (The 10-year Treasury is a good "benchmark" for interest rates.) Meanwhile, inflation is running at about 6%. So buyers of 10-year Treasurys are locking in a 3% annual loss of purchasing power –
The Chinese aren't stupid. They've been net sellers of U.S. Treasury debt for most of the past year.
Japan isn't stupid, either. It's on the sell side, too.
Indeed, the only one stupid enough to buy low-yielding U.S. Treasury debt is the U.S. itself. Over the past nine months, the Federal Reserve has increased its holdings of Treasury notes and bonds from $720 billion to more than $1.4 trillion.