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Jamie McGeever: Foreign central banks think twice on U.S. Treasuries

Section: Daily Dispatches

By Jamie McGeever
Tuesday, January 23, 2024

If foreign investors en masse are gorging on U.S. Treasuries, central banks may be beginning to lose their appetite.

Official U.S. flows data show that overseas private-sector investors -- banks, asset managers, insurance funds, pension funds, retail investors -- are loading up on Treasuries while the official sector's holdings are flat-lining at best.

... Dispatch continues below ...


Guanajuato Silver Commences Processing
Third-Party Gold and Silver at El Cubo

Company Announcement
Wednesday, January 17, 2024

VANCOUVER, British Columbia, Canada -- Guanajuato Silver Company Ltd. (TSXV:GSVR) (OTCQX:GSVRF) announces commencement of a relationship with a Mexican silver mining company to process a portion of its surface inventory of mineralized material at Guanajuato Silver's wholly owned El Cubo mines complex in Guanajuato, Mexico.

Guanajuato Silver's chairman and chief executive officer, James Anderson, said: "We are excited to have reached this agreement, which will use a considerable amount of the excess capacity that exists at our El Cubo mill. We believe both parties will benefit from this agreement, as we collectively look to expand silver production in the Guanajuato area through the processing of low-cost and readily available material.

"With additional unutilized capacity still available at El Cubo, we continue to pursue similar business agreements with other mining groups in the area." ...

... For the remainder of the announcement:

As long as this active or de facto retreat from central banks is more of a whimper than a bang, the $26 trillion U.S. government bond market should be relatively unaffected. One group of buyers is simply replacing another.

But it may come with a price -- a rising "term premium." That's the amorphous amount of compensation investors demand for buying long-dated bonds instead of rolling over bills. It is the premium for unquantifiable risks in the future beyond current assumptions on the long-term path of inflation or policy rates.

Price-sensitive buyers with more of an eye on generating returns may not always be as reliable as price-insensitive buyers perhaps more concerned with capital preservation, liquidity, and cautious reserve management goals.

Foreign central banks and the U.S. Federal Reserve were the two price-insensitive buyers and holders of Treasuries for many years, and their huge demand helped explain why term premium went negative even as U.S. borrowing rocketed.

But both are now backing away -- the Fed is reducing its balance sheet and foreign central banks are no longer buying in as large size. Indeed, there are signs they are actively selling. ...

... For the remainder of the analysis:

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