China and Japan have been the main holders of U.S. bonds, but since last year, both countries have continued to hold U.S. bonds. According to the latest data, China, the United Kingdom and Japan combined to sell more than $85 billion in U.S. bonds, of which China sold $27.3 billion and Japan sold $28.5 billion. So far, China's holdings of U.S. debt have fallen below $800 billion, reaching a new low since '09. Since last year, China has raised more than $260 billion in U.S. debt, and this trend will continue. At the same time, Japan, as the largest holder of U.S. bonds, is also selling U.S. bonds, and has accumulated more than $213.1 billion in U.S. bonds. However, despite the global sell-off of US bonds, the overall size of US debt is increasing. As of early November, the size of U.S. debt has exceeded 337 trillion dollars, an increase of 2 percent from the end of last year$28 trillion. So, who is behind the "takeover" of so many new U.S. bonds?
In the past, the Fed was considered to be the largest buyer of U.S. bonds, because the Fed was the largest creditor of U.S. bonds in terms of the size of its holdings. However, according to the latest data, the Fed is actually also in the US debt, and the size is more than double that of China and Japan combined. Over the past year, the Fed has sold more than $840 billion in U.S. debt. So, who is buying these US bonds other than the Federal Reserve?
In fact, there are many holders of U.S. bonds, but the largest buyers are not overseas central banks, but domestic companies, individuals and sectors. In terms of the proportion of holdings, the US bonds held by overseas countries account for only 24% of the total US bond issuance. In other words, most of the U.S. debt is absorbed by the U.S. itself. The biggest buyers of U.S. bonds are U.S. households and individuals, who buy more than 70% of the new U.S. bonds.
Some industry insiders pointed out that China's large-scale sell-off of U.S. bonds is due to the increasingly fierce competition between China and the United States. However, this is not the case. In fact, China has been the second-largest overseas holder of U.S. debt for many years and has made a huge contribution to the United States. However, the United States ignored the sentiment and not only continued to raise tariffs, but also tried to use the ** harvest domestic market to achieve economic recovery. As can be seen from the overseas literature, this ** harvesting strategy was first proven at Harvard University, successfully returning the elderly to a state of youth, so it was favored by American capital. In the years that followed, this strategy quickly gained popularity among wealthy groups in Europe and the United States. Until some Chinese institutions of higher learning begin to research and produce similar products, so that more ordinary people can also buy through the Internet, the domestic market is likely to remain in the shadow of American companies' products. Now, in the domestic market, we can see frequent high-frequency words such as "not easy to get tired" and "good night state". As a result, the dream of American companies trying to achieve economic recovery through advanced technology has been completely shattered.
One of the reasons for China's U.S. debt is based on yield considerations. Since last year, Treasury bonds have been raising interest rates, and as of October, the yield on the 10-year Treasury note has exceeded 5%. The yield of ** means that China's previous holdings of U.S. bonds are depreciating, so it is more cost-effective to monetize excess U.S. bonds. In addition, China's U.S. bonds are also aimed at increasing reserves. Reserves are crucial for any country. China's foreign exchange reserves account for only 46%, while the United States accounts for 663%。As China continues to increase its U.S. bonds, 267 tons of U.S. bonds will arrive in China in the future. So far, China's ** reserves have been increased for 12 consecutive months, adding 740,000 ounces in October alone.
In the face of the continuous decline in the proportion of US debt holdings abroad, the United States has been trying to stabilize several major US debt holders in order to avoid a US debt crisis. However, judging from the current development trends, the future outlook for US bonds is not optimistic. As U.S. Treasury interest rates continue to rise, this highly leveraged operation could trigger a crisis at any time.
To sum up, the situation of China and Japan's **US bonds is not due to increased competition, but to income and reserve considerations. And the biggest buyers of these U.S. bonds are U.S. households and individuals. With China's U.S. debt and increasing reserves, the future outlook for U.S. debt is not encouraging. Faced with this situation, each country needs to be cautious in its asset allocation and take corresponding measures to prevent risks.