As long US yields recently rose to levels not seen for a half decade, pundits rushed to fit   causal theories to facts. Chief among the accused are central bankers said to have abandoned their historical sponsorship of US bonds. The fate of US yields and other markets now largely rests on two preoccupations: are foreign central bankers abandoning US Treasuries for other asset classes and are they abandoning the US dollar for other currencies?

The single-word answer to these interrelated questions is a resounding “No”. The Bank for International Settlements recently estimated that total reserve accumulation by sovereign investors in 2007 could exceed by 100 per cent the net, new issuance of the US Treasury, Fannie Mae and Freddie Mac, all euro-area federal issuance, all UK federal issuance and all European Investment Bank and KfW, the German state development bank, issuance combined. With some $800bn to be added this year to the $8,000bn already managed by central banks, ministries of finance and the newer, federally sponsored stabilisation funds, there is simply not enough new, high-quality debt in the world to sate sovereign demand.