Looks like it's time to start looking for somewhere else to peddle those Treasuries -- but then, when hasn't it been? Soc Gen's FX head Kit Juckes:
A cosy relationship has formed over the years whereby the resistance to allow currencies to appreciate too much in Japan and China has fuelled appetite for US assets, which in turn has allowed the US to run a huge deficit (with gradually falling Treasury yields). This is changing, and not (yet) in a good way.
Here are the current account balances he is referring to. Japan and China's combined current account has deteriorated significantly over the last few years and continues to head lower:
Also, why risk-on/risk-off will continue to be the norm:
Capital flows don't match up to current account flows -- and don't need to -- but since the global recession, the decline in the US deficit has mirrored the fall in the China/Japan surplus. The "big story" hasn't been on that side of the equation, but rather, about the increased flow of capital out of the US in response to seriously unattractive domestic yields, and the periodic breaks in that outflow that trigger dollar strength and 'risk off' moments across asset markets. The chart below shows the lurch back into capital repatriation into the US in 2008/2009, but other than that, it?s been a very one-way flow.
As Tyler Durden noted earlier [14], "the truth is that in this new normal only beta matters (the more lever the better), and the only beta that matters is that generated by relative USD strength/weakness." Observe:

Juckes sees the eurozone (Germany) presiding over the largest surplus provided the euro "escapes the weight of the threat to its existence," and reduced import demand due to austerity in many of the EMU countries running deficits will contribute. He concludes:
The image that comes to mind is of a puzzle where the pieces no longer fit easily together. In the end they will, but the way that happens will affect asset prices. The big price-insensitive buyers of dollars will be less important. That won't move US yields up much while rates are zero and QE (whether sterilised or not) is taking place. But Treasury yields are at the end of their 30-year bull market. As long as rates are anchored by the Fed and the US is running a large deficit without automatic demand for US assets from China and Japan, it isn't helpful for the dollar ... And sadly, the 'risk on-risk off' gyration will go on as US investors seek positive real returns where they can.

