Waning demand for Treasuries is not a good sign for the Trump administration
Earlier in the week, data showed that Japanese investors dumped a record amount of US Treasuries for the month of February. While that owed in part to the higher hedging costs as highlighted at the time, it's also worth mentioning what the decline in demand would mean for the US government.
The issue of the twin deficits is still a major theme lurking in the background for the US dollar, and the fact that foreign investors are starting to rotate away from Treasuries highlights a cause of concern for Trump's borrowing costs (the fiscal/budget deficit side of things).
The US Treasury is only starting to open its floodgates to the market, and it is doing so at a time when foreign demand is weak. And that is a threat that will feed into higher borrowing costs for the Trump administration if future auctions are underwhelming.
On the one hand, weaker flows into Treasuries promotes a weaker US dollar which will help Trump in his battle to counter the current account deficit - but at the same time, the weakening demand in Treasuries will serve to increase his costs with regards to the fiscal/budget deficit.
That will surely be a thorn that the Trump administration needs to deal with this year.
