Tuesday, February 22, 2005

Economic indicators

Markets fall as Asian banks move away from dollar assets

Financial markets reversed yesterday on concerns that Asian central banks were diversifying out of US dollar assets and that demand for oil would remain persistently strong.

A bad sign. A very bad sign.

Treasuries dip on diversification fears

Concerns about bigger supply and weaker demand sent Treasury prices lower and yields higher on Tuesday.

Bonds fell on news that South Korea's central bank was looking to diversify its $200bn in reserves, suggesting it would sell some of its dollar holdings and therefore US government bonds. South Korea has the fourth-biggest reserves in Asia.

The news from Korea coincided with the US Treasury's announcement of a scheduled $24bn sale of two-year notes on Thursday, which helped undermine prices. There was also concern over a possible rise in US consumer prices, due for release on Wednesday.

Another bad sign.

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