Yields have been the primary factor for foreign investors, experts said
When looking at the U.S. Treasury bond market over the last year, why has domestic demand been so anemic and why has foreign demand been so strong? This question was posed to us this week by reporter Andrew Moran of The Epoch Times.
QUOTED EXCERPT
“Foreign demand has remained strong, bolstered by a robust and appreciating U.S. dollar—a development for which many foreign family offices and institutional investors were inadequately prepared,” Michael Ashley Schulman, chief investment officer at Running Point Capital Advisors, told The Epoch Times.
“With many developed markets offering low yields, U.S. Treasuries stand out for their liquidity, stability, and comparatively attractive rates.”
In 2024, the Treasury issued approximately $2 trillion in bonds, according to the department’s refunding estimates.
Schulman notes that this has placed a renewed focus on the widening supply-demand dynamics.
“The domestic bond market has faced a surplus of issuance due to escalating government deficits and corporate borrowing demands, creating tension between supply and investor demand,” Schulman stated.
ALSO QUOTED in the article
🟠Torsten Slok, chief economist at Apollo
🟠Tom Essaye president of Sevens Research Report
ADDITIONAL THOUGHTS
After several years of subpar returns from the US Aggregate Bond Index, intermediate Treasuries, and long-term Treasuries, some investors have grown increasingly weary and wary of these traditionally safe asset classes.
While Treasuries excel as a stable ballast in portfolios during recessions or economic uncertainty, they may be less attractive during periods of growth and/or inflation. In such environments, investors typically reduce safety positions in favor of growth and yield-focused investments.
Persistent inflation—or “stayflation” as we call it because it’s not abating—along with rising debt concerns voiced by bond vigilantes, have made domestic participants hesitant to purchase much on the long end of the curve.
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