2024 will be the peak of U.S. bond issuance, according to statistics from CICC and other institutions, in 2024, there will be about $9 trillion in U.S. Treasury bonds maturing, accounting for about one-third of all outstanding U.S. debt, which is 35 times. Faced with a huge amount of maturing debt, the United States will be forced to extend its maturing debt by borrowing new debt to repay old debt, and the scale of U.S. bond issuance will increase significantly.
However, the recent auction of U.S. Treasury bonds has been dismal, overseas demand has been sharply**, and the bid multiples are lower than the recent average. New Receiver - Traders were forced to take over, and the proportion of first-level dealers who undertook all the "receivers" who did not buy ** hit the highest level since October 2023.
With the advent of the peak of U.S. bond issuance, a large number of U.S. bonds will be issued in a concentrated manner, and the unsold U.S. bonds may be further intensified. Against this backdrop, what will happen if overseas investors such as China stop buying?
If overseas investors are not willing to buy, the pressure on U.S. bond traders to take over will increase significantly. If even U.S. bond traders can't take over, the Fed will have to take over again, and if the situation requires, the Fed will launch quantitative easing measures again, start the money printing machine, and print money to buy U.S. Treasury bonds on a large scale.
Therefore, in the short term, there will not be a situation where US bonds are undersubscribed and US debt risks are out of control. As former Federal Reserve Chairman Alan Greenspan said, "The reason we can always pay off any debt is because we can print money all the time."
But in the medium to long term, the risk of a U.S. debt crisis is enormous, and since 2008, the U.S. fiscal deficit and debt have grown at an alarming rate, with the U.S. national debt now exceeding $34 trillion, and an increase of $20 trillion in the past 13 years.
According to statistics from foreign institutions, since 1980, the U.S. debt has doubled every eight years on average. At this rate, the US national debt could reach $100 trillion by 2036.
This means that between now and 2036, excluding borrowing new debt to repay old debt, the scale of US bond issuance may increase by about $70 trillion. It will be larger than the GDP of the United States, China and Germany combined.
February** Dynamic Incentive Program Such a huge scale, in addition to the United States itself to start the printing press to buy, itself to save itself. No country in the world is in a position to help. Fed Chairman Jerome Powell recently publicly admitted that the United States is on an unsustainable fiscal path in the long run.
At the same time, in addition to the huge national debt, US companies hold about 75% of US GDP. The current situation is even worse than the peak in 2008. Currently, the total debt of the United States (Treasuries, corporate bonds, and personal debt, etc.) is 35 times, compared to 1970, only 15 times.
At present, about 70% of US Treasury bonds are held by various institutional and individual investors in the United States, and overseas investors, including China and Japan, only hold about 30% of US Treasury bonds, and as of December 2023, Chinese mainland holds US bonds of 816.3 billion US dollars, an increase of 34.3 billion US dollars from November, accounting for only 2 percent of the total size of US bondsAround 4%, the impact on the U.S. bond market is relatively limited.