Amid all the news about Syria and record oil prices, you may
have missed a crucial red flag for the bond market.
The two biggest foreign investors in U.S. Treasuries have been
aggressively selling bonds since June. Those two countries are
China and Japan, and their actions are a sign of the growing risk
of owning long-term bonds.
In the month of June, these two countries accounted for nearly
$40.8 billion in sales of U.S. Treasuries. Now June is the most
recent month of data available - and it's likely that the exodus
has continued in July and August.
After years of buying more U.S. Treasuries at every auction,
China and Japan have actually started selling their stakes.
These countries have been selling U.S. Treasuries for three
months now, and their sales are accelerating.
Now, China and Japan can't just dump all their Treasuries
overnight. After all, China owns $1.3 trillion of
Treasuries and Japan holds $1.1 trillion. Massive selling
overnight could cause panic in the bond market, and disrupt
foreign and trade relations.
Important to note is that the June sales of U.S. Treasuries
marked the biggest outflow since 1977 when the government began
collecting data. And it's no coincidence that the massive selling
happened immediately after Ben Bernanke announced plans to
"taper" bond purchases. The end of QE3 is underway, and foreign
investors don't want to stick around.
A senior economist at the Chinese Academy of Social
Sciences - a top China think-tank - had this to say.
"China's net selling of U.S. treasury could be
a reaction to the possible QE exit. Holding too
much U.S. debt is not wise at a time when Treasury yields
rise and prices fall."
In a couple weeks, data for July will be available. When it
comes out, I expect we'll see that June was just the start of a
massive sell-off in U.S. Treasuries.
The selling to date has been primarily long-term bonds. That's
because bonds with lengthy durations have the most to lose when
interest rates rise.
While China and Japan can't dump all their long-term U.S.
Treasuries overnight without tilting their hands investors like
you and I don't have the same problem. We can and should be
following the lead of China and Japan: now is the time to sell
The tides are clearly starting to turn. Even the Pimco's Bill
Gross - The King of Bonds - says "
The secular 30-year bull market in bonds likely ended on
April 29, 2013.
After all, two of our country's biggest trading partners and
bond investors have stopped buying our bonds. Not only
that, but they're now selling their existing holdings into the
market. If China and Japan don't want to buy our bonds, who
Whether you own bonds today or have already sold your
holdings, you should be concerned. I've prepared a detailed
investment report titled
The Bond Bubble Survival Guide
. It provides you with my analysis and a roadmap for protecting
your wealth and profiting in the years ahead.
If you share my concerns - and want to protect your stock and
bond portfolio from rising interest rates - than I encourage you
to read more.
Just click here to get all the details, and learn
how to take action today.