Thursday, February 24, 2011

Because Treasuries Are a Safe Haven, The Dollar Is Not

Marc Chandler submits:

The U.S. dollar has been unable to find much traction in recent days, despite the heightened tensions in the Middle East and North Africa. The price action has raised questions about the dollar's role as a safe haven.

What does seem to be a safe haven are U.S. Treasuries. Despite greater confidence that the U.S. economy has gained momentum, the U.S. yields have fallen. Some of the rally in Treasuries may be reflecting portfolio shifts away from equities and toward fixed income. Anecdotal evidence suggests a good foreign bid as well. Demand from indirect bidders, which include foreign central banks, was above last month's for the 2 year note. It was a little softer for Wednesday's 5-year note, but still took down a little more than a third.

Thursday the U.S. auctions $29 billion 7-year notes and despite the lackluster overall demand for the five year, the safe haven demand


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