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Keep Your Eye on Treasurys

Tuesday, March 27, 2012, 7:19 PM
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Treasury Market Rumblings

One of the key indicators that I keep a semi-open eye on throughout every trading day is the price of US Treasurys. As you know, the US is living on the kindness of strangers, and if foreign desire for US Treasury obligations wanes, much trouble could quickly mount for the US dollar and general fiscal condition.

As prices for Treasurys rise or sink, interest rates move in exactly opposite directions..

Like any asset class, the price of Treasurys will rise if there are more buyers than sellers, and sink if there are more sellers than buyers.

A natural, normal, and healthy reason for Treasurys to sink in price would be investors leaving the "flight to safety" trade because they perceive economic conditions to be improving. Less good reasons include the fear of inflation picking up, over-issuance by the government, and foreign entities leaving the trade.

 

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