Primary dealers have upped their purchases as foreign buying has declined. As the fed’s qe program provided a ready buyer the dealers could make a decent turn and underwrite the issuance. Risk free, easy money. But with the end of qe2 (sustained fed balance sheet however) the dealers may get squeezed out here. Certainly it will be interesting to see what occurs.
Excellent article from Zerohedge on the subject.
http://www.zerohedge.com/article/presenting-plunge-foreign-interest-us-treasurys
The first test of the issue this week against a backdrop of China being unable to sell all the bonds she wanted to sell last week as posted.
Rich
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