Foreign Holders Dump A Whopping $40.8 Billion In Long-Term Treasuries

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August 16, 2013 1:28pm NYSE:SHY NYSE:TBT

market bondsMike Larson:  Did you hear the news out of the Treasury Department this recently? It was an absolute disaster for the bond market — and for good reason:

Foreign holders dumped a whopping $40.8 billion in long-term Treasuries, the biggest exodus from bonds in the history of the U.S.

Worse, June was actually the third month of mass dumping in the past four, for a total of $79 billion. China, the biggest holder of our bonds, unloaded $21.5 billion, while Japan, the second-largest holder, dumped $20.3 billion.

The chart below says it all. The spikes on the right display the selling.

Click for larger version

It wasn’t just government bonds, either. Foreigners dumped $116 million of bonds made up of packaged U.S. mortgages. They sold $5.2 billion of Fannie Mae, Freddie Mac and Ginnie Mae bonds, and $5 billion in corporate bonds. And they unloaded $26.8 billion of U.S. stocks.

All told, more international capital flowed out of U.S. markets than at any time in history, worse even than at the depths of the 2008 credit crisis.

I’ve been warning readers to get out of bonds for a year now. I said to dump Treasury bonds, emerging market bonds, junk bonds, municipal bonds and vulnerable bond-like stocks, with REITs looking particularly dangerous. Indeed, I said the Federal Reserve was inflating its third massive bubble in the past 15 years (after “dot-bombs” and housing), and that it was going to blow up in our face.

The bond selloff is going from bad to worse as prices collapse and yields hit two-year highs.
The bond selloff is going from bad to worse as prices collapse and yields hit two-year highs.

Now, each and every one of my predictions is coming true. I trust you took advantage of the artificially inflated bond prices we had many months ago to dump like crazy. And I trust you are completely side-stepping this carnage. Or better yet, if you’ve been following my recommendations, you’re profiting from this bond-market crash.

But as this sell-off goes from bad to worse — with prices collapsing again today and yields surging to fresh two-year highs — I’m ready to take the next step with you.

And if you haven’t yet sold your bonds — and especially, your interest-rate-sensitive stocks, what are you waiting for?

Mike LarsonThis article is brought to you courtesy of Mike Larson

Money and Markets is a free daily investment newsletter published by Weiss Research, Inc. This publication does not provide individual, customized investment or trading advice. All information is based upon data whose accuracy is deemed reliable, but not guaranteed. Performance returns cited are derived from our best estimates, but hypothetical as we do not track actual prices of customer purchases and sales. We cannot guarantee the accuracy of third party advertisements or sponsors, and these ads do not necessarily express the viewpoints of Money and Markets or its editors.

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