US 10-year Treasury bond yield breached 5%

June 7th, 2007

Share |

At this time of writing, the US 10-year Treasury bond yield had just breached 5%, the first time since August 2006. In our previous article, Why is US mortgage rate rising?, we mentioned, ?Our theory is that this may have something to do with China.?

Now, we suspect it is more than just China. Kuwait recently announced ending the peg of its dinar to the US dollar (see Kuwait abandons US dollar peg). Syria is following suit in July this year (see Syria to drop US dollar peg)?Syria may not have much US dollars, but the oil-producing Middle Eastern nation’s hoard of US dollars is significant. Is the rest of oil-rich Middle Eastern nations following suit?

Watch this space. This will have further implications on the long-term US Treasury bonds. As we said before in our previous article, Awash with cash?what to do with it?,

The next question is, what would these countries buy to replace their US dollars [that they are getting rid of]?