China, Japan Grab Fannie Mae, GE Debt American Bondholders Skip

Bloomberg reports:

The U.S. government has financed a swelling budget deficit for four years by relying on non-U.S. investors. They own about 52 percent of the $4.2 trillion of Treasury securities, up from 35 percent as recently as 2002. A study done for the Fed last September said foreign demand lowered 10-year Treasury yields by about 1.5 percentage points.

International purchases of Treasuries are ``one of the reasons why long-term rates have stayed relatively low despite a series of increases in short-term rates imposed by the Federal Reserve,'' said Tony Crescenzi, chief bond market strategist at Miller Tabak & Co. in New York, in an e-mail.

The Fed last week raised its benchmark interest rate to 4.75 percent from 4.5 percent, its 15th straight quarter-point boost.

If foreign buying isn't as aggressive, rates will have to go higher.You'll want to read this whole article.