The U.S. debt problem has been in the spotlight, and there has been a strange phenomenon recently: many countries have sold off U.S. bonds, and the issuance of U.S. bonds is still so active. So, who is taking over these sell-off US bonds?The latest** data reveals a surprising answer – 70% of new US bond issues are bought by American households and individuals. This article will analyze and describe the situation of selling U.S. bonds by various countries, the selling behavior of the Federal Reserve, and the risk of the American people becoming the receiver.
In September, not only did China sell US bonds on a massive scale, but also the two major US bond holders, the United Kingdom and Japan. In just one month, China sold $27.3 billion in U.S. debt and now holds $778.1 billion in U.S. debt. In addition, the Federal Reserve, as the largest holder of U.S. Treasuries, is also continuing to sell U.S. Treasuries. Since the start of balance sheet reduction in June last year, the Fed has raised more than $840 billion in U.S. debt. These sell-offs led to a sharp increase in the U.S. bond market, and against this backdrop, the U.S. Treasury took the opportunity to issue new U.S. bonds on a large scale, resulting in an imbalance between supply and demand.
On the one hand, the reason for China's large-scale sell-off of US bonds is related to the management of foreign exchange reserves. In recent years, as the size of foreign exchange reserves has dwindled, China has had to sell off some of its U.S. bonds because it needs to manage its foreign exchange. On the other hand, China has taken a series of measures to stabilize the domestic economy, including increasing infrastructure investment and reducing the financing costs of enterprises, which require a large amount of financial support. As a result, the sell-off of US bonds can provide China with funds** and is also a safe-haven operation.
According to the latest data, 70% of new US bond issuance was purchased by American households and individuals. Recently, U.S. Treasury yields have been rising, attracting many U.S. ** funds to the U.S. bond market, hoping to make profits in a high-interest environment. However, we need to note that the rising US Treasury yields mean that the pressure on the US Treasury to repay high interest rates in the future will increase. According to statistics, as of October this year, the annual interest expense of the United States has exceeded $1,000 billion for the first time. And now the United States only earns about 4 percent a year4 trillion dollars, of which nearly 1 4 was spent on interest repayments. As the interest burden increases in the future and the principal of the debt matures, along with other expenses such as wages, the US fiscal deficit is only expected to grow. Therefore, the American people, as the receivers of this Treasury bond issuance, are likely to eventually become Yellen's leek-cutting targets.
There are several reasons why American families and individuals are prime buyers. First, the recent U.S. bank crash has led to a large amount of deposits being transferred into currency**. These** quickly increased the size of funds under management in the short term, and some of the funds were used to buy short-term U.S. bonds. However, this happened in the first half of the year, when the US Treasury had not yet received approval for the issuance of new US Treasuries. In the second half of the year, the U.S. Treasury began to issue U.S. bonds on a large scale, but the scale of ** declined, and it did not continue to increase its holdings of U.S. bonds. Second, due to the rise in Treasury yields, many U.S. markets** believe that they are profitable, so they have moved funds into the U.S. bond market. But in fact, the risk of US debt is gradually increasing.
There are huge risks behind the massive issuance of U.S. Treasury bonds. First of all, the amount of U.S. bonds that have been sold off is huge, and it is mainly domestic households and individuals who have taken over. Once the value of U.S. Treasuries is **, it will cause huge losses to these investors. Second, the U.S. bond market is too large, which may lead to higher interest rates, which will reduce the returns of U.S. bond holders. In addition, the widening fiscal deficit and the increase in the interest burden could adversely affect the U.S. economy.
However, we cannot ignore the outlook for US debt. Despite the risks in the U.S. Treasury market, its status as a global reserve currency and the strength of the U.S. economy make it attractive. In addition, the stability of the U.S. bond market also provides a safe haven asset option for global investors. Therefore, it is still possible that US bonds will continue to be sought after by buyers in the future.
Overall, there has been a recent sell-off of US bonds in a number of countries, with China once again at the forefront. At the same time, we also revealed that 70% of new US bond issues were purchased by US households and individuals. However, there are significant risks behind this phenomenon, including an increase in the value of U.S. bonds** and the interest burden. Therefore, investors need to be cautious about the U.S. bond market. Regardless, U.S. Treasuries remain attractive, with their stability and global reserve currency status providing investors with a safe haven option. The outlook remains uncertain and requires further observation.