Postcards: The Saudis Brought a Knife to a Bond Party

Too many people are worried about a dollar crisis. The real crisis is in the duration bond market... and the last people holding the bag will all have U.S. passports.

Dear Fellow Expat:

The race against the clock to beat Hurricane was beyond anticlimactic. My flight change paid off as the 7 p.m. flight was canceled.

But if you were looking for an action film about a Florida man against nature…

This wasn’t it.

More on that in a moment.

For now, I want to show you a chart that’s far more scary than anything nature can hurl our way…

Witness to a Global Bond Brawl

In recent weeks, I’ve discussed America’s challenge ahead.

It’s not a dollar crisis that awaits; rather, we face a duration bond crisis.

China, facing pressure to stabilize the yuan, ordered banks to sell dollars and buy stocks. But they may need to dump U.S. Treasuries – and they have about $850 billion worth on the books.

Japan, meanwhile, has altered its monetary policy. A recent Yield Curve Control program would enable the shorter-term bonds to shift from 0.5% to 1.0% on the upper bound. Several insurance companies have taken a hit from falling U.S. bond prices – and they’d love to bring some money…