Fed buying Treasurys just as foreign purchases slacken

The Federal Reserve is buying up to $300 billion in Treasurys to flood the sluggish US economy with money and spur growth. But could it also be to offset slowing overseas purchases? Just last week China expressed “worry” about its mammoth investments in US government securities.

Brad Setser also expresses concern about the slowing demand in his blog: “Consider a chart showing foreign purchases of long-term Treasuries over the past 3 months. Incidentally, the split between private and official purchases in this data should largely be ignored. The revised (i.e. post-survey) data generally have attributed nearly all the flow from 2003 to the official sector.” (Chart from Setser’s blog, Follow the Money.)

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