Japanese Are Bailing Out of US Treasury Bonds

MarketWatch reports that detailed May data from the Ministry of Finance shows that Japanese investors were joining the exodus out of U.S. Treasurys, noted Marc Chandler, global head of currency strategy at Brown Brothers Harriman:

 It appears that the bulk of the bonds that Japanese investors sold in May were US Treasurys and the roughly $30 billion were a record amount. This follows the $15.5 billion sales in April.  May was the fifth consecutive month Japanese investors have reduced their U.S. Treasury holdings and over this period sold about 8 trilion yen.

Analysts at Danske Bank note that the selling of foreign bonds goes back to the first quarter, when it was apparently driven by the need for portfolio managers to adjust the share of foreign-securities holdings in the wake of the yen’s sharp fall. The second-quarter selloff appears driven to a larger extent by worries about Fed tapering and its potential to push up global bond yields, they said.

This is what is going to make it very difficult for the Fed to slow/stop buying Treasury securities. When they slow/stop, there will be even more upside pressure on rates, with very serious sellers.