U.S. Treasury Secretary Janet Yellen has been under tremendous pressure recently, especially after the latest U.S. bond holdings data are released. In the past, the U.S. marketed most of its U.S. debt to overseas countries to diversify risk, but that has changed. The U.S. hopes to shift the pressure on other countries, but it doesn't succeed, and it may end up being the average American family and people who bear the cost of the harvest. At present, U.S. debt has become a common problem faced by the Federal Reserve and the U.S. Treasury. Fed Chair Jerome Powell has been hesitating between raising interest rates and stopping them. In the middle of the year, Powell tried to stop raising interest rates, but the result was that inflation was noticeable** and he had to raise interest rates again. However, the rate of economic growth accelerated after the rate hike, which led to the Fed having to stop raising interest rates. Curiously, Treasury yields have remained elevated, regardless of whether they are raised or stopped. While the yield on US Treasury bonds has fallen slightly in the last 10 years, it is currently around 4Around 3%, a slight decrease from the peak of 5%, but still at a high level compared to 1% before the rate hike. For the current situation, U.S. Treasury Secretary Yellen may blame the Fed, not only because the Fed's interest rate hikes have led to rising Treasury yields, but also because the Fed has massively reduced its balance sheet and sold off U.S. bonds, which led to the collapse of U.S. bonds. The latest data shows that in addition to China's continued sell-off of U.S. bonds, Japan, the largest holder, and the United Kingdom, the third-largest holder, have also changed the pace of last month's ** and turned to a large sell-off of U.S. bonds. In September alone, the three overseas countries jointly sold $89 billion in U.S. bonds. In this case, the U.S. Treasury is facing a lack of buyers when issuing new Treasury bonds.
In the past, U.S. Treasury purchasers mainly consisted of U.S. banks and Wall Street asset managers. U.S. banks used to be one of the major buyers of U.S. bonds. Especially after the pandemic, the United States issued a large amount of money, which led to an increase in bank deposits. In order to allocate these funds, many banks buy a variety of bonds in large quantities, especially US Treasuries. However, in recent years, US debt has persisted, which has led to huge losses on the bank's books, affecting depositors' confidence. Subsequently, there was a run on the bank and bankruptcy. Banks are currently clearing their previous huge losses and are therefore unable to buy large amounts of U.S. bonds. Another important buying force is Wall Street asset managers such as Vanguard and BlackRock. These institutions manage large amounts of assets and have become major buyers of U.S. bonds, which are larger than those of most countries. However, also affected by the continuous development of U.S. bonds, the scale of assets under management of Wall Street asset management institutions has shrunk significantly, and the net value of their assets has been declining, and some investors have redeemed their funds, which has brought great pressure to these institutions. Therefore, in this case, they cannot buy US bonds on a large scale.
The latest data reveals a shocking phenomenon: as of June this year, the US Treasury Department received new permission to start selling US bonds to the market, and the main buyers of these US bonds are actually ordinary American households and **, accounting for nearly 70%. However, Yellen is well aware of the high probability of a future default on her bonds, so the ideal scenario for her is to sell them to other countries. But the reality is the opposite, and the US debt is flowing back into the hands of the American people. If a future crisis escalates, it will be American families who will ultimately be affected. Worryingly, American households may not be able to afford the risk of defaulting on their debts.
The U.S. debt problem is a long-standing problem for the United States. In the past, the U.S. has marketed large amounts of U.S. debt to other countries to diversify risk, but now the situation has changed, and U.S. debt has become a burden for domestic risk. Banks and asset managers, who have been the main buyers of U.S. bonds in the past, have not been able to continue to buy large amounts due to market changes, and the latest data shows that ordinary households in the United States have become important buyers of U.S. bonds. This situation has caused concern for Yellen, who knows that there is a risk of default on U.S. debt, and households are the most vulnerable link. For the average household, a debt default could lead to property damage, an economic downturn, and employment woes. Therefore, ** and relevant departments should strengthen supervision and management to ensure the stability of the U.S. bond market, so that ordinary families and people in the United States will not be the last to harvest. On the road to solving the U.S. debt problem in the long term, the U.S. needs to find new purchasing power, such as attracting more institutional investors or strengthening guidance and protection for domestic investors. In addition, it is also necessary to strengthen risk prevention and control and crisis response capabilities to deal with possible default risks and market changes. Only in this way can we effectively solve the problem of US debt and safeguard the stability of the country's economy and the interests of the people.