US Treasury bonds remain a hot ticket for investors looking for a low risk investment in a volatile market despite the unprecedented downgrade of Washington’s credit rating, analysts say.
The decision by Standard & Poor’s to strip Washington of its top triple-A rating has done little to diminish investors’ appetite for US Treasuries, which along with gold, the Swiss franc and the yen are considered among the safest of assets.
At first it may seem somewhat paradoxical, but with investors concerned about a slowdown in the global economy, they are piling into US bonds which are also attractive because of the dollar’s reserve currency status.
record levels
On Monday, the first trading day after the the S&P downgrade, US bond prices rose to record levels on strong demand in a fresh issue, with the rate of return for investors dropping from before the US lost its top rating.
On the secondary market the yield on 10-year securities dropped on Wednesday to 2.09 percent, the lowest rate since December 2008 and down from 2.56 percent on Friday, before the S&P announcement.
“We do not regard the Standard & Poor’s downgrade as an immediate threat to Treasuries keeping their safe-harbor status,” market analysts Briefing Research said.
“Treasuries are still the gold standard, so much so that as the US veered toward a default [during negotiations to raise its debt ceiling] Treasuries rallied on a flight-to-safety ... as if they were being rewarded for a crime,” the group said.
The gyrations on global stock exchanges this past week have only increased their attraction.
‘most liquid’
“The US Treasury market will remain by far the largest and most liquid in the world, with no equal, and a relative safe haven in times of global financial stress — as demonstrated in last week’s global financial turmoil and ‘wholesale flight to safety and quality,’” said Nigel Gault from market forecasters IHS Global Insight.
Few assets can claim this role: among them are gold, which this week surged and set a new record above US$1,800 an ounce, and certain currencies including the Swiss franc and the yen which have also been riding high.
A rush of safe-haven money into the franc led to fresh records against the dollar and the euro, forcing the Swiss National Bank to take additional measures to stem its rise which is hurting the country’s industry.
The Federal Reserve’s decision on Tuesday to maintain interest rates at close to zero levels for two years also reassured markets, Aurel BGC said.
Analysts said meanwhile that China, the world’s largest foreign holder of US debt, has no choice but to maintain its Treasury holdings, with Beijing’s hands tied for several reasons in the short run.
no option
China has the world’s largest foreign exchange reserves at more than US$3 trillion, and experts believe it would be difficult for it to find alternative investment options able to absorb such volume.
With around US$1.2 trillion in US Treasuries, Beijing also cannot conduct large-scale selling of dollar assets without diminishing the value of its remaining holdings, they said.
“It is very difficult to cut US Treasuries holdings. With such huge foreign exchange reserves, if you don’t invest in US debt, it is hardly possible to diversify them,” said Liu Hongke, economist at CCB International Securities.
“Despite the downgrade [in the US credit rating], the US is still safer than Europe,” Liu added.
“Unlike a spurned romantic partner, many investors have nowhere to turn for notionally low risk, highly liquid investment options,” said Nicholas Colas from ConvergEx. “If you need to park large amounts of capital, the US sovereign debt market is still the only garage that can accommodate the tractor-trailers of cash generated by large oil producing countries or major exporting nations.”
Taiwan Transport and Storage Corp (TTS, 台灣通運倉儲) yesterday unveiled its first electric tractor unit — manufactured by Volvo Trucks — in a ceremony in Taipei, and said the unit would soon be used to transport cement produced by Taiwan Cement Corp (TCC, 台灣水泥). Both TTS and TCC belong to TCC International Holdings Ltd (台泥國際集團). With the electric tractor unit, the Taipei-based cement firm would become the first in Taiwan to use electric vehicles to transport construction materials. TTS chairman Koo Kung-yi (辜公怡), Volvo Trucks vice president of sales and marketing Johan Selven, TCC president Roman Cheng (程耀輝) and Taikoo Motors Group
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
New apartments in Taiwan’s major cities are getting smaller, while old apartments are increasingly occupied by older people, many of whom live alone, government data showed. The phenomenon has to do with sharpening unaffordable property prices and an aging population, property brokers said. Apartments with one bedroom that are two years old or older have gained a noticeable presence in the nation’s six special municipalities as well as Hsinchu county and city in the past five years, Evertrust Rehouse Co (永慶房產集團) found, citing data from the government’s real-price transaction platform. In Taipei, apartments with one bedroom accounted for 19 percent of deals last
RECORD-BREAKING: TSMC’s net profit last quarter beat market expectations by expanding 8.9% and it was the best first-quarter profit in the chipmaker’s history Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), which counts Nvidia Corp as a key customer, yesterday said that artificial intelligence (AI) server chip revenue is set to more than double this year from last year amid rising demand. The chipmaker expects the growth momentum to continue in the next five years with an annual compound growth rate of 50 percent, TSMC chief executive officer C.C. Wei (魏哲家) told investors yesterday. By 2028, AI chips’ contribution to revenue would climb to about 20 percent from a percentage in the low teens, Wei said. “Almost all the AI innovators are working with TSMC to address the