This is the type of story that very in North America is aware of, yet can portend to huge changes:
For all the talk this year about the Chinese refusing to buy U.S. bonds, the real story is about the People’s Republic of China’s failure to find buyers for the equivalent of $1.7 billion of its debt because too many investors showed no interest at auctions that would be considered disastrous if their outcomes were repeated on Wall Street.
Other Asian countries face similar difficulties. India’s underwriters had to purchase 3.1 billion rupees ($64 million) of 25-year securities they were unable to sell at a July 10 auction. Vietnam and the Philippines abandoned offerings because investors demanded higher yields than the governments were willing to pay. China’s 11.9 billion yuan in unsold short-term debt represented 14.3 percent of the 83 billion yuan it offered in three sales this month.
A lot of people who bash the US sovereign debt don't realize how attractive it is compared to emerging market soverign debt. This isn't just my opinion; it's the market's opinion.
Rising bond yields is equivalent to tightening of money so it remains to be seen how economies in those countries will be impacted. I'm also curious to see if the bond yield in America splits off from the emerging market ones. That is, will bond yields in America stay low while they rise in emerging markets? Tags: bonds and credit instruments