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Matt's Market Insights

 

The answers to two looming questions are becoming clearer: Why have interest rates fallen? And is China actively trying to rid itself of exposure to the dollar?

 

Below is a chart of the yield on the 10-Year Treasury Note. After starting the year near 3%, yields have continuously fallen through 2014 and now sit near 2.5%. This move was unexpected for a number of reasons, and many investors took this as an ominous sign from the bond market. Interest rates often decline during periods of economic weakness, and the declining rate environment has caused a cloud of worry to engulf the markets.

 

It's also been puzzling how interest rates could fall at a time when the Federal Reserve is systematically removing itself as the major buyer of Treasuries. As it turns out, the Fed may have China to thank for providing a clean exit.

 

 

 

Recent data shows that in 2014, China has been purchasing ... Log in or subscribe to continue reading.


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