At the end of October, Bloomberg ran an analysis of who has been buying America's debt this year. Most of it was tables. One line from a State Street strategist cut through all of them.
"The Treasury market isn't losing foreign buyers, it's losing automatic buyers," said Masahiko Loo, a senior fixed-income strategist at State Street Investment Management.
He added that an increasingly unpredictable U.S. makes the automatic recycling of capital into Treasuries "harder to justify."
Read the first line again. The world still wants Treasuries. What it stopped doing is buying them on reflex.
For 80 years, that reflex was part of the bargain. America supplied security and the reserve currency. Allies recycled their savings into U.S. debt without much debate.
Once reflex turns into a decision, every auction becomes a negotiation. And Washington is about to ask for a lot more money.
The Friends Stepped Back