JPMorgan Is Worried About Who’s Going to Buy All the Bonds
“Who Will Buy?” is the exuberant ensemble number from the 1962 musical hit Oliver! It is also the rallying cry of a number of investors and analysts who are worried about who exactly will be purchasing trillions of dollars worth of bonds as inflation bites and public deficits balloon.
Such concerns were on full show last week, when gilt yields soared after the UK government unveiled a mini-budget full of tax cuts that were expected to expand the UK’s debt burden. Prime Minister Liz Truss has since reversed the plan, but worries over the future attractiveness of a wide variety of bonds remains.
To understand the concern, look no further than the analysts at JPMorgan Chase & Co., who argue that buyers across a wide variety of debt — including even the US Treasuries which form the backbone of global markets — are stepping away.
“We remain concerned about the (lack of) structural demand for Treasuries,” wrote JPMorgan analysts led by Jay Barry and Srini Ramaswamy.
In fact, they say, all of the three main buyers for US government debt — commercial banks, foreign governments and of course the Federal Reserve itself — appear to have stepped away from the market. While some of the retreat is to be expected as the US central bank tapers its balance sheet, the scale of the shift in appetite is still noteworthy, they write.
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