"Across the Curve
A daily bond market chronicle
A constant theme of late has been the tremendous pile of cash which foreign central banks are plowing into the front end of the treasury market. One dealer offered several solid reasons for those important investment flows.
Central banks have some inflation fears and have no interest in the back end of the market.
Currency market intervention which results in central banks buying dollars and then need a place to invest them. The front end of the Treasury market is a worthy sanctuary.
According to one trader there has been some recent issuance by sovereign issuers and some of that money has found a parking spot in the front end.
The end of FDIC guaranteed issuance,which was a high yielding alternative to the Treasury market, has forced the central banks back into Treasuries."Me:
“The end of FDIC guaranteed issuance,which was a high yielding alternative to the Treasury market, has forced the central banks back into Treasuries.”What effect would extending these guarantees to riskier assets have on their viability for central banks? What is the FDIC Guarantee wor