Goldman Sachs: Foreign Private Demand Likely Modest So Far

Goldman Sachs note that they "have previously observed the presence of a strong foreign bid for Treasuries - Fed custody holdings appear to be ratcheting higher on the back of higher yields and a weakening dollar. However, in contrast to robust foreign official sector demand, the timing of Treasury yield moves suggests somewhat more limited foreign private sector involvement thus far. Since the sharp sell-off following the Georgia Senate run-off elections, yields have moved higher outside of US trading hours, with Tsys rallying during them; to the extent that net foreign buying has happened, it has likely occurred when New York was open. While it is fairly common for foreign official sector investors to transact during New York hours, private buyers tend to have a stronger presence outside of these hours. The lack of a rally during those times therefore suggests to us limited (net) buying by these investors. Over time, however, we do expect the relative yield pick-up offered by Treasuries to be supportive of foreign private demand as well, with the foreign private and foreign official sectors likely to be the largest non-Fed net buyers of USTs in 2021."