HALISTER1: Rising Foreign UST Demand Could Steepen Curve: Credit Agricole

Rising Foreign UST Demand Could Steepen Curve: Credit Agricole

(Bloomberg) -- An increase in the Fed’s UST custody holdings and total net purchases by China and Japan indicate rising foreign demand for Treasuries, Credit Agricole analyst Alex Li writes in July 25 note.
  • Demand increase is “conducive to steepeners going forward” because foreign holdings “concentrate in the front to intermediate sector”
  • Fed’s custody holdings of USTs increased ~$133b so far this year, “a good proxy for foreign central bank demand” as they account for ~75% of total foreign official holdings
  • Foreign net purchases were $46b in May, with China’s holdings up $10b, according to TIC report; Japan’s net purchases totaled ~$56b over past 3 months, according to Ministry of Finance data
To contact the reporter on this story: Anna Windemuth in New York at awindemuth1@bloomberg.net To contact the editors responsible for this story: Boris Korby at bkorby1@bloomberg.net Elizabeth Stanton

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Alex Li (Credit Agricole SA)

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