Russia May Swap Some U.S. Treasuries for IMF Debt

click on chart to enlarge

Everyday we here another news story about central banks wanting to switch out of the U.S. dollar. This is extremely important stuff and is being reflected in yields on long dated bonds. The above chart is the yield on the 30 year Treasury Bond. As you can plainly see the yield is up big the last two months. In January the yield was 2.5% today it's 4.77%, almost double. I exepect the yeild to eclipse 10% in the next 12 months. The 10 year is almost 4% today compared to 2% in January. Many mortage rates are based on the 10 year yield so this dramatic rise is troubling at best. Our massive deficits and the Fed's move toward quantative easing (money printing) and monetizing the debt (buying treasury bonds that foreigners no long want) is the reason why yields are rising. Rising yields will kill any "green shoots" of recovery that everyone is taling about. This IS the big story right now and I am watching it carefully.-Lou

Russia May Swap Some U.S. Treasuries for IMF Debt

June 10 (Bloomberg) -- Russia’s central bank said it may cut investments in U.S. Treasuries, currently valued at as much as $140 billion, a week after China said it may reduce reliance on the dollar and American bonds.

Treasuries fell after

Alexei Ulyukayev, first deputy chairman of Bank Rossii, said some reserves may be moved into International Monetary Fund debt. The yield on the 10-year note rose six basis points, or 0.06 percentage point, to 3.92 percent as of 8:27 a.m. in New York, according to BGCantor Market Data.

Finance Minister Kudrin said on May 26 Russia will buy $10 billion of IMF bonds from the reserves and China may buy as much as $50 billion, IMF Managing Director

Dominique Strauss-Kahn said yesterday. Some investors are wary of U.S. assets because the budget deficit is projected to reach $1.75 trillion in the year ending Sept. 30 from last year’s $455 billion, the Congressional Budget Office says.

“The bigger picture is people are worried there are too many Treasuries, and that no one is even making a pretense of getting the fiscal deficit under control,” said

Francis Beddington, co-founder of Insparo Asset Management, which oversees about $140 million in London.

‘Window of Opportunity’

Treasury Secretary

Timothy Geithner said in Beijing on June 2 there will be enough demand for record sales of U.S. debt. He met with Chinese officials after Premier Wen Jiabao called in March for the U.S. “to guarantee the safety of China’s assets” and central bank Governor Zhou Xiaochuan proposed a new global currency to reduce reliance on the dollar.

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