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One of the most commonly heard words in international financial markets recently is "de-dollarization", including some southern countries that were once too dependent on the dollar are also actively promoting the wave of "de-dollarization" to strive for the use of local currency exchange in international trade. This also made the "debt-ridden" United States fall into a debt crisis, but in the past three months, nearly $1 trillion of U.S. debt has been robbed, which is somewhat contrary to the situation in previous months when countries rushed to sell U.S. debt, so who is crazy to grab U.S. debt? Has the United States solved its debt crisis? Can the United States now pay back the huge interest rate?
U.S. debt was robbed
In the past three months, what we have been knowing is that China is accelerating the reduction of US debt, but what we do not know is that the new US debt issuance of 1 trillion US bonds has been shortened.
It stands to reason that U.S. bonds can now be said to be a "hot potato", and many financial institutions are not very optimistic about the prospects of U.S. bonds, why can U.S. bonds be robbed in the past three months?
One thing we have to understand here is that most of the U.S. bonds issued in the past three months are short-term U.S. bonds.
Recent core CPI data in the United States has exceeded expectations, which has also made it less likely that the Fed will keep interest rates unchanged, and the market has begun to bet that the Fed will continue to raise interest rates.
This led to a fall in the price of U.S. bonds and an increase in yields.
Today, the yield on short-term U.S. bonds has soared above 5%, which has attracted a large number of small investors.
According to foreign media data, $2.898 billion in June U.S. Treasuries with a yield of 5.29% were purchased by small investors.
Don't look at this 2.898 billion compared to $1 trillion in U.S. bonds is a small amount, you must know that this figure is about 5 times that before the Fed raised interest rates.
Not to mention the demand for this short-term Treasury by some financial institutions.
The United States now needs such a large number of investors to buy U.S. bonds so that it can avoid the gradual collapse of the financial system that is forced to quantitative tightening.
Some people here must ask, now that the United States is in a deep debt crisis, why do so many people still buy US debt?
U.S. Debt is a financial product
The U.S. bonds that have been robbed this time are some short- and medium-term U.S. bonds, which are a financial product in the eyes of most investment institutions.
Here we have to understand the advantages of short- and medium-term U.S. bonds as a financial product.
The first is that market interest rates are higher.
Compared with long-term U.S. bonds, short-term U.S. bonds are more sensitive to market interest rates, that is, they can feedback market changes in a short period of time.
If market interest rates are higher, these short- and medium-term U.S. Treasuries will have higher coupon rates and prices, and will have higher yields.
Secondly, the liquidity risk is low.
According to US media reports, in the past three months, most of the buyers of US bonds are small investors, who are interested in the liquidity of short- and medium-term US bonds.
Short- and medium-term U.S. bonds are easy to realize, and investors can also sell their U.S. bonds in a short period of time if there is a shortage of funds after purchase, alleviating the crisis at hand.
The last point is that the price of short- and medium-term U.S. bonds is greatly affected by supply and demand, and when the market environment is better, the yield will also improve.
This time, the United States issued short-term US bonds, and most of the people who took over were America's own investors and financial institutions.
Buffett has also said that he is very optimistic about short-term U.S. Treasury bonds, after all, interest rates are relatively at a high level, and the risk of redemption is small.
This time, the newly issued short-term U.S. bonds were snapped up, which is also of great benefit to the United States.
According to data released by foreign media, many middlemen in the bond market still had $116 billion in debt in July, and after this "rush" of short-term U.S. bonds by the U.S. financial market, the middlemen's liabilities fell back to $46 billion in August.
In fact, the strong demand for short-term U.S. bonds in the U.S. market also made the U.S. side breathe a sigh of relief.
Until then, the US had been forced to implement quantitative tightening to shrink its balance sheet.
But with this group of investors pouring into the bond market, the US does not seem to be thinking about continuing quantitative tightening in the short term, given that there are so many buyers to fill the debt gap.
This is why short-term US debt has been robbed even though it already has obvious potential debt risks.
But it cannot be ignored that the United States has now suspended debt risks, but it does not mean that the United States has avoided potential risks.
The risk of default on U.S. bonds remains
Although this short-term U.S. debt has been robbed, it is only a false prosperity, and the United States currently has a whopping $7.6 trillion interest-bearing US debt that will mature within a year.
Therefore, it is not that the US debt has been robbed madly means that the US debt crisis has eased, and short-term US debt can only be said to "drink and quench thirst" for the current United States.
This can also answer the doubts of some netizens, why many media are talking about US debt, no one wants, but the reality is that US debt is very sought-after.
In fact, only short-term U.S. bonds are sought-after, and long-term U.S. bonds are not wanted.
What the United States hopes that someone can take over is long-term U.S. bonds, because only long-term U.S. bonds can use "time" for "space" to fundamentally alleviate the financial crisis in the United States.
Although short-term U.S. bonds can alleviate the current risk of default, in the long run, it only increases the cost of U.S. debt, and will also increase the U.S. budget, disguised as an economic crisis coming faster.
Now the yield of short-term US bonds exceeds 5%, and now the US GDP growth rate has not reached 5, which basically means that the US earnings rate is simply not enough for the interest that the United States wants to repay, so the risk is still there, and this situation is still very dangerous.
Personally, I think that short-term U.S. bonds are snapped up is actually not a good phenomenon, in the past the protagonist of the United States to save the economy is technology, with the economic downturn of the entire international community in the past two years, and the global hegemony of science and technology is also shaky, it is not ruled out that the United States will use some extreme means, such as events similar to the Russian-Ukrainian conflict, to control the return of dollars.
At present, China is still the world's second largest holder of US debt, I believe many people will think that it should polish US debt as soon as possible to avoid risks.
However, it is necessary to understand that reducing US debt holdings is the most beneficial means for the current mainland economy.
It must be known that the mainland has been able to maintain the basic stability of the exchange rate for such a long time, relying on its strong foreign exchange reserve capacity, and now the mainland has been promoting the internationalization of the renminbi, which has greatly increased the renminbi reserves abroad.
Faced with the cooling of Sino-US relations, the decline in China's exports and the decline in US dollar revenues, the mainland has reduced its holdings of US bonds in exchange for US dollars, and then exchanged for an "internationalized" renminbi, which can also reduce the risk of RMB liquidity.
The Fed's expectation of stopping interest rate hikes has been lowered, which means that interest rate hikes will continue in the future.
Its realization in the United States of the investment group has changed, now are pursuing short-term interests, it can be seen that the future economic trend and stability of the United States is not optimistic, now really have to ask the United States: how long can you raise interest rates?
What do you think about this matter, welcome to discuss in the comment area!
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