The Fed is hitting the hammer on inflation and to get to 2% inflation they are making some big moves.
- Treasuries at The Fed have reduced from over $6 trillion to $5.6 trillion
- China dumping US Treasuries (total holdings near ~$1 trillion) to defend Yuan against the US Dollar (current exchange rate 7.3 Yuan per $, an increase of 14% over the beginning of the year)
- The Bank of Japan is friendly with the US, but as the second highest foreign owner of US Treasuries after China they may have to sell with their own inflation/currency woes.
Jennifer Lamar of Diamond Nest Egg is debating switching from a 13-week to a 17-week ladder buy strategy. She is adamant on not selling her T-Bills before maturity. For a 3-4% interest rate this is a great way to deploy capital short term in a relatively (for the patient) liquid state.
Could the liquidity situation in the Treasury market get worse? Yes. Could it get much worse even? Possibly.
Jennifer Lamar November 2022
