According to recent news, the world's top three overseas buyers, Japan, China and the United Kingdom, have all ** US Treasury bonds, totaling $89 billion. This raises the question of why these countries, which have always held US debt firmly, would choose to ** at the same timeIn fact, there are several main reasons for this.
First, overseas countries are concerned about the growing size of the U.S. debt and the risk of default. The data shows that the size of the US Treasury debt has reached 33$9 trillion, well above the projected U.S. gross domestic product (GDP) in 202222222222 by 2574 trillion dollars. Countries that hold U.S. debt are concerned about the possibility of future debt defaults as the size of U.S. debt continues to expand.
Second, in order to control domestic inflation, the Federal Reserve has continued to raise interest rates since last year, and now the interest rate on US Treasury bonds has reached 5%. This means that the United States will have to pay a huge interest expense per year, which is expected to be as high as 1$5 trillion. Many countries fear that the pressure on U.S. debt service interest will continue to increase, which could eventually lead to the outbreak of a debt crisis.
Third, uncertainty about future U.S. economic growth has led to a lack of confidence in overseas countries. Although on the surface, the US GDP growth rate in the first three quarters of this year was strong, reaching 20$27 trillion, and the annual GDP is expected to reach $27 trillion. However, in fact, there are two main reasons for this economic growth: one is that the Federal Reserve keeps raising interest rates, which leads to the dollar index**, which boosts GDP growth in the United States;Second, the United States has serious domestic inflation, which has led to an increase in people's consumption spending, which has also promoted GDP growth to a certain extent. Once the Fed stops raising interest rates and inflation in the United States falls, the growth rate of the US economy is likely to decline sharply. As a result, overseas countries that hold U.S. bonds are not optimistic about the future of the U.S. economy.
The moves of these countries to ** US bonds have had a certain impact on the global financial market. First, the increase in U.S. debt could lead to a rise in domestic interest rates, which could have a dampening effect on the U.S. economy. Second, this action could trigger market pressure to sell back to the dollar, which in turn could lead to a depreciation of the dollar. In addition, the action may also trigger other investors' concerns about the U.S. financial markets, creating market panic.
In the face of the sell-off by overseas buyers, who is currently buying U.S. bonds?According to the data, households and individuals in the United States have become the largest "pick-up man" in the purchase of U.S. bonds, accounting for more than 70% of the new U.S. bonds. The reason why individual investors in the United States are buying US bonds is mainly due to the relatively high interest rate level of US bonds, which has reached 5%. This high-return and relatively risk-free investment has caught the eye of ordinary Americans.
However, this situation has caused problems for Yellen, the chairman of the US Federal Reserve System. She had planned to pass on the crisis in the United States to other countries through the issuance of a large number of U.S. bonds, so that other countries would pay for the crisis in the United States. However, it now appears that most of the purchases of US bonds are American families and individuals, and Yellen's plan to pass on the crisis has failed. At the same time, individual investors in the United States do not have much savings, which means that it is difficult to find a new "receiver" after a large-scale issuance of US bonds. If all the savings of American households are used to buy Treasury bonds in the future, it will become more difficult to find new external buyers.
The reasons behind the sell-off are not just superficial concerns and risks, but also deeper internal motivations. In getting to the bottom of the story, we need to get to the bottom of the exodus of overseas buyers from the U.S. bond market.
First of all, overseas buyers have been ** U.S. bonds, which can be said to be bucking the trend. The move almost starkly contrasted with the enthusiasm of other investors around the world for US Treasuries, sparking suspicion and shock in the market. Among them, China is one of the largest countries, and has gradually reduced its holdings of U.S. bonds since 2020. From the highest at 13 trillion US dollars has dropped to the current 778.1 billion US dollars, and since the beginning of this year, it has accumulated 89 billion yuan. China's sell-off of U.S. bonds has led the market to speculate whether China has lost the confidence and confidence to continue to hold U.S. bonds
Second, the actions of overseas buyers** of U.S. bonds have exposed concerns about the direction of the U.S. economy and policy. Over the past few years, the United States has continued to adopt loose monetary policy and large-scale stimulus programs, resulting in an economic expansion accompanied by a huge debt accumulation. This way of accumulating debt has raised concerns about the future sustainability of the U.S. economy, and overseas buyers have begun to reassess the risk-reward ratio of their portfolios.
Third, the withdrawal of overseas buyers is also closely related to the uncertainty of domestic politics and the situation in the United States. Especially in recent years, the U.S. dispute and tensions with many countries have created more uncertainty in the market. This makes it difficult for overseas buyers to ** the future direction of the U.S. economy and policy, and further exacerbates their withdrawal sentiment.
To sum up, the actions of overseas buyers to buy US bonds are not only a reaction to the growth of US debt and uncertain economic prospects, but also reflect their concerns about the direction of the US economy and policy. This action may have varying degrees of impact on global financial markets, especially on the situation of the US dollar and US interest rates. With the rapid changes in the global economy, we also need to remain vigilant and respond to risks.
As overseas buyers sell off U.S. bonds, a new buyer has emerged in the U.S. bond market – American households. The data shows that, unlike other investors, American households and individuals have become the biggest "pick-ups" for US bonds, accounting for more than 70% of the total new US bond issuance.
This is due to the fact that the current interest rate on US Treasuries is relatively high, reaching the level of 5%. This high return and lower risk has attracted domestic home investors. They see the stability and safety of U.S. bonds as a reliable investment tool.
However, for U.S. household investors, there are certain risks and challenges associated with buying U.S. bonds. First, American households are not rich in savings, and large-scale purchases of U.S. bonds would consume most of their savings. As time goes on, it will become more and more difficult to find a new "receiver", which may lead to a decrease in purchasing power, which in turn will affect the stability of the market and the supply and demand of US bonds.
Second, U.S. households' purchases of U.S. Treasuries frustrated Fed Chair Janet Yellen's plan to pass on the crisis. Yellen had hoped to pass on the risk of the crisis in the United States to other countries through the massive issuance of US bonds, and eventually make them pay for the crisis in the United States. However, the majority of current purchases of U.S. bonds are U.S. household investors, not outside countries. That means Yellen's plan won't come to fruition, and she'll face a bigger dilemma of finding new buyers to buy U.S. bonds.
In short, the recent sell-off of US bonds by overseas buyers has brought some uncertainty to the global financial markets. In the process, U.S. households have become new players in buying U.S. bonds, while overseas buyers' behavior is mainly a reaction to the growth of U.S. debt and uncertainty about the future economic outlook. As the global economy changes and risks intensify, we need to remain vigilant and take corresponding measures to deal with potential risks.