Friday, January 26, 2024
Al-Fatlawi: Iraqi policy is continuing to remove the occupation forces from the country, 26 JAN
Al-Fatlawi: Iraqi policy is continuing to remove the occupation forces from the country
Information / Baghdad.
Ali al-Fatlawi, a member of the Fatah Alliance, said that Iraq is on the way to removing the combat forces of the US occupation, while maintaining diplomatic cooperation like other countries that work on this principle.
Al-Fatlawi told Al-Maalouma that "Iraq's policy is proceeding on the right real track to end the US presence in the country and remove the occupation forces from military bases."
He added that "the removal of the occupation forces from Iraq opens the door to the continuation of diplomatic cooperation, as any Arab or foreign regional country does, provided that the combat presence of US forces inside Iraq is ended."
He pointed out that "America has cards to play against countries that oppose its path and project in the region, and Iraq has taken a decision to remove the occupying forces from the country, where it works through its cards to exert pressure to ensure the achievement of its goals, but the matter cannot pass on the Iraqis as they will not obey any pressure exerted by Washington towards them."
Foreign Central Banks Rejecting US Treasuries as Bond Values Collapse BY AWAKE-IN-3D, 26 JAN
Foreign Central Banks Rejecting US Treasuries as Bond Values Collapse
On January 25, 2024
By Awake-In-3D
As a follow up to my previous article reporting that foreign buyers of US Treasuries are surging, let’s now look at the fact that foreign central bank purchases of US bonds are significantly drying up.
The landscape of US Treasury investments is witnessing a notable shift, primarily driven by foreign central banks.
Traditionally viewed as the epitome of safe investments, US Treasuries are now being questioned by these major global players due to several emerging risks.
These include the US government’s tendency to impose sanctions, its growing deficits, and the persistent inflation crisis.
Looking ahead, the US Treasury Market is transforming into a highly speculative (volatile) environment.
Since early 2022, the increase in rates from near zero to 5.5% has resulted in considerable valuation losses, particularly affecting the holdings of central banks in emerging markets.
Once seen as a risk-free asset, these bonds are now approached with caution by foreign central banks, signaling a major transformation in the global financial landscape.
Foreign Central Banks Rethink US Treasuries
Foreign central banks are rethinking their stance on US Treasuries.
It’s hardly surprising to see them exit. Holding US bonds comes with significant risks. The US government’s propensity to use sanctions to freeze assets poses a clear danger.
Yet, this is just the surface issue. Deeper concerns revolve around the burgeoning US deficits, the never-ending inflation crisis, and the Federal Reserve’s loosening grip on the treasury market.
While foreign investors robustly continue to purchase US Treasuries, central banks are showing a diminishing interest.
Foreign central bank holdings are, at best, stagnating and, in reality, being offloaded.
This leads to a pressing question: why are central banks abandoning what was once deemed the world’s risk-free asset?
What Implications Does This Have For The Future Of US Bonds?
Central banks typically seek stability in their investments. A 10-year Treasury bill is expected to maintain a consistent value. However, the last two years have seen a stark reversal.
Since early 2022, the Federal Reserve hiked interest rates from near zero to 5.5%, causing significant losses for central banks on their bond holdings.
The inverse relationship between interest rates and bond values is critical here. As the Fed combatted inflation, the value of US Treasuries plummeted.
US 10-Year Bond Values Have Collapsed by 40% Since 2022
According to Fidelity, a 1% hike in interest rates can decrease the value of a 10-year Treasury by 9%. A 3% increase could lead to a 27% crash.
What happens with a 5% hike? A catastrophic collapse in bond prices of over 40%.
Ironically, this turmoil coincides with a time when central banks, particularly in emerging markets, desperately need US dollars.
As interest rates soar, so does the dollar, forcing central banks to defend their local currencies. In this scramble, many governments incur substantial losses by selling their Treasuries, wiping out years of interest payments.
The Fall In Treasury Holdings Of Central Banks Is Evident
Since 2022, there’s been a noticeable value drop (loss) in foreign central bank US Bond holdings.
November alone saw a loss of almost $50 billion in Treasury holdings by central banks. The instability in value poses a significant risk for future investments.
The chart below shows that, since 2008, Treasury holdings by foreign central banks have plummeted from over 40% to under 15% this year—a clear indication of a major shift away from what was once considered a risk-free asset.
The Dangerous New Buyers of US Treasuries Filling the Gap
The landscape of US Treasury buyers is undergoing a dramatic change, with significant implications for both the US and the global economy. The two traditionally largest and price-insensitive buyers of US Treasuries – the Federal Reserve and foreign central banks – are either scaling back or selling their holdings.
This shift leads to a precarious situation where new buyers are emerging to fill the gap.
These include banks, pension funds, and retail investors, all of whom are highly price-sensitive.
This sensitivity spells trouble for the stability of the US Treasury Market. Inflation in the US could easily surpass the yield of a 10-year or 30-year bond, even if held to maturity.
This scenario presents a significant risk of loss, either through inflation outpacing yields or the government effectively defaulting by inflating away its debt.
Consequently, new buyers demand higher yields to compensate for these heightened risks. The new buyer base is poised to demand substantial premiums to finance Washington’s spending habits.
With the best buyers withdrawing due to Federal Reserve and government policies, the world’s largest bond market is now facing significant turmoil.
This situation is exacerbated by the ever-increasing supply of US Treasuries.
Two decades ago, the Treasury debt outstanding was only $3.6 trillion, but as of December, it ballooned to $26.4 trillion.
With deficit spending on the rise, more bonds are issued, and traditional buyers like central banks are retreating.
In their place, bargain hunters and speculators emerge, demanding higher yields and showing readiness to offload their bonds without hesitation.
Market speculations, such as the anticipated Federal Reserve rate cuts, further complicate the situation. With inflation resurging, investors are becoming increasingly wary.
For instance, JP Morgan clients significantly reduced their long bets on US Treasuries, dropping from nearly 40% in November to just 20%. This shift indicates growing speculation in a market traditionally characterized by stability.
Looking ahead, the US Treasury Market is transforming into a highly speculative (volatile) environment.
As a result, we can expect two things: bond yields, and by extension, real economy interest rates, to decline more slowly than anticipated, unless a recession occurs.
Additionally, the era of zero interest rates is effectively over.
With the best buyers withdrawing due to Federal Reserve and government policies, the world’s largest bond market is now facing significant turmoil.
Supporting article: https://www.reuters.com/markets/us/foreign-central-banks-think-twice-us-treasuries-mcgeever-2024-01-23/
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© GCR Real-Time News
An American spokesman reveals the details of ending the international coalition’s mission in Iraq, 26 JAN
An American spokesman reveals the details of ending the international coalition’s mission in Iraq
A US State Department spokesman confirmed that Washington and Baghdad are "close" to agreeing to start the work of the Supreme Military Committee in preparation for transforming the mission of the US-led International Coalition to Defeat ISIS into bilateral relations.
The spokesman told Al-Hurra website: “As we announced in August 2023, we are looking forward to moving forward with (the formation of) the Higher Military Commission (or HMC for short), because it reflects the United States’ deep commitment to regional stability and Iraqi sovereignty.”
The spokesman added, "The United States and Iraq are close to agreeing on the start of the Supreme Military Committee dialogue, which was previously announced in August."
The spokesman stressed that "HMC is a point to discuss the transition of the international coalition to defeat ISIS to steadfast bilateral security relations between Iraq and the United States."
He stated, "The two parties will discuss how the mission can develop within a time frame according to several factors, including the threat from ISIS, the operational environment, and the capabilities of the Iraqi forces."
The spokesman concluded his statement to Al-Hurra by saying: "We have talked about this matter for months, and the timing has nothing to do with the recent attacks. The United States will reserve its full right to defend itself during the talks."
Al-Hurra website says that the spokesman’s confirmation came in response to a request for comment regarding reports published by Reuters and CNN that talked about the launch of negotiations between Washington and Baghdad regarding the American presence in Iraq.
Yesterday, Wednesday, the Iraqi Foreign Ministry received a letter it described as “important” from the US government, conveyed by Ambassador Elena Romanski, indicating that the Prime Minister “will study this message,” according to what the Iraqi Foreign Minister announced.
Subsequently, Al-Sudani chaired a meeting of the Ministerial Council for National Security, in the presence of the Minister of Foreign Affairs, during which developments in the security situation in Iraq were discussed.
Four sources told Reuters yesterday, Wednesday, that the United States and Iraq are about to begin talks on ending the mission of the US-led military coalition in Iraq and how to replace it with bilateral relations, a step in a process that was halted due to the war in the Gaza Strip.
Iraq, one of the few countries that is an ally of both Tehran and Washington, has witnessed an escalation in mutual attacks between armed factions and American forces since the outbreak of the war in Gaza, as the factions seek to put pressure on the United States because of its support for Israel.
American forces in Syria and Iraq were subjected to about 150 attacks launched by factions allied with Iran, and the United States launched a series of attacks in response to what it was exposed to, the last of which was on Tuesday.
The escalating violence prompted the Iraqi Prime Minister, Muhammad Shia al-Sudani, to call for the speedy exit of the Washington-led coalition forces through negotiations, a process that was about to begin last year, but the war in Gaza led to its faltering, according to what was reported by Reuters.
Washington did not want to negotiate a possible withdrawal while it was under attacks, as it feared that any change in the mission would appear to occur under pressure, which would embolden regional rivals, including Iran, according to Reuters.
Two sources told Reuters that calculations had changed amid the realization that the attacks would likely not stop and that the current situation was leading to a steady escalation.
An American official told the same agency that the committee will allow for a joint assessment of the Iraqi security forces' ability to fight ISIS "and determine the nature of the bilateral security relationship."
The attacks are carried out by Iraqi armed factions with close ties to Iran, most of whom are not represented in parliament or the government, but have influence over the decision-making process.
Iraqi and American officials hope that the formal start of the talks will contribute to easing political pressure on the Sudanese government and perhaps reduce attacks on American forces, according to Reuters. link
"RV UPDATE" BY GOLDILOCK, 26 JAN
Goldilocks and Seeds of Wisdom
We are approaching a sink-or-swim situation. The Banking System has prepared well for the up-and-coming volatility inside the markets and banking system with new capital requirements to minimize many of the fluctuations that are about to come our way in every sector of the market.
New Tokenized Assets are creating new Protocols and opportunities to bring in money spent outside of the banking system. These new assets will be governed through artificial intelligence in many cases capable of helping investors navigate through the new landscape of the new digital economy.
As these forces are brought together, price distortions will come into the new financial system seeking new algorithmic support levels. It will be the new support levels that will determine new prices on the road ahead of us as Global Markets begin to transition into a Global Currency Reset capable of measuring and controlling these new rates through new Quantum Technologies.
© Goldilocks