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Did you hear the news out of the Treasury Department this morning? It was an absolute disaster for the bond market — and for good reason:
Foreign holders dumped a whopping $40.8 billion in long-term Treasuries, the biggest exodus from bonds in the history of the U.S.
Worse, June was actually the third month of mass dumping in the past four, for a total of $79 billion. China, the biggest holder of our bonds, unloaded $21.5 billion, while Japan, the second-largest holder, dumped $20.3 billion.
The chart below says it all. The spikes on the right display the selling.
It wasn’t just government bonds, either. Foreigners dumped $116 million of bonds made up of packaged U.S. mortgages. They sold $5.2 billion of Fannie Mae, Freddie Mac and Ginnie Mae bonds, and $5 billion in corporate bonds. And they unloaded $26.8 billion of U.S. stocks.
All told, more international capital flowed out of U.S. markets than at any time in history, worse even than at the depths of the 2008 credit crisis.
I’ve been warning readers and subscribers to get out of bonds for a year now. I said to dump Treasury bonds, emerging market bonds, junk bonds, municipal bonds and vulnerable bond-like stocks, with REITs looking particularly dangerous. Indeed, I said the Federal Reserve was inflating its third massive bubble in the past 15 years (after “dot-bombs” and housing), and that it was going to blow up in our face.
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| The bond selloff is going from bad to worse as prices collapse and yields hit two-year highs. |
Now, each and every one of my predictions is coming true. I trust you took advantage of the artificially inflated bond prices we had many months ago to dump like crazy. And I trust you are completely side-stepping this carnage. Or better yet, if you’ve been following my recommendations in Safe Money, you’re profiting from this bond-market crash via a unique investment that rises in value as bonds fall.
But as this sell-off goes from bad to worse — with prices collapsing again today and yields surging to fresh two-year highs — I’m ready to take the next step with you.
And if you haven’t yet sold your bonds — and especially, your interest-rate-sensitive stocks, what are you waiting for?
Until next time,
Mike
Mike Larson graduated from Boston University with a B.S. degree in Journalism and a B.A. degree in English in 1998, and went to work for Bankrate.com. There, he learned the mortgage and interest rates markets inside and out. Mike then joined Weiss Research in 2001. He is the editor of Safe Money Report. He is often quoted by the Washington Post, Reuters, Dow Jones Newswires, Orlando Sentinel, Palm Beach Post and Sun-Sentinel, and he has appeared on CNN, Bloomberg Television and CNBC.
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Could be the beginning of a financial meltdown.
Hmmm…NED Davis Research shows China as net buyer during the selloff, not seller.
"Not sure what figures Ned Davis is referring to. But China was, in fact, a net seller of long-term Treasuries per the Treasury Department. There are different categories of assets, so they may be referring to something the Chinese did in a different asset class." — Mike