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Make-or-Break Week for Bonds

With more than $100 billion of US government bonds going up for sale, amid concern from China and others about the amount of debt the US is generating, Barack Obama has little choice but to stay the course. In a television interview Monday the President said, "we are out of money now".

Much of the demand for the two year term sale yesterday ($40 billion) came from Asia, feeding concern that the Chinese central bank is switching to short term bonds. Analysts said sales of five and seven year bonds may be tougher than the two year sale.

The problems will become even more acute next week when the Treasury tries to sell 10 year and 30 year bonds. Have the Chinese lost their appetite for the longer term issues? We will soon find out.

Disclosure: No position.