At present, the total US national debt has reached $33.6 trillion, which is the country that owes the most money in the world, and in the past month, the US debt has rapidly increased by nearly 600 billion US dollars, and the pace of borrowing is getting faster and faster.
On Monday, the US 10-year US Treasury yield once again exceeded 5%, the highest record since 2007, the US Treasury yield hit a new high, last month the 30-year US Treasury auction was very dismal, which means that the US bond can not be sold, especially the long-term US Treasury is facing the embarrassing situation of no one to care.
The more you sell, the more yields will continue to rise, in short, as long as the yield is high enough, there will always be someone to buy, but the market performance seems to be lukewarm, and the liquidity of US bonds is undergoing a huge test.
Considering the sharp decline in the price of U.S. bonds and the future risks of U.S. bonds, overseas central banks continue to sell U.S. bonds, and even within the United States, they are dumping U.S. bonds.
The US Treasury released the US Treasury data for August this year in the middle of this month, because there was a two-month delay in the data, so the September data will not be released until mid-November.
According to the latest data released, China's holdings of U.S. bonds fell to $805.4 billion in August this year, a decrease of $16.4 billion compared with July, so China reduced its holdings of $16.4 billion that month, and in the first eight months of this year, China sold a total of $61.7 billion.
Among these overseas investors, China has reduced its holdings the most, and at the current pace of reductions, mainland holdings of U.S. bonds are expected to fall below $800 billion for the first time by September.
China continues to reduce its holdings of U.S. bonds, on the one hand, because the price of long-term U.S. bonds continues to fall, and most of China's holdings of U.S. bonds are long-term U.S. bonds, of the 805.4 billion U.S. bonds as of August, long-term U.S. bonds reached $793.5 billion, accounting for 98.52%.
The sharp fall in the price of U.S. bonds means a loss, and as U.S. bond yields continue to rise, U.S. bond prices may continue to fall, so selling some long-term U.S. bonds at this time can reduce losses.
On the other hand, the mainland sold U.S. bonds, bought gold, continued to improve the structure of foreign exchange reserves, and in August the mainland bought a lot of gold reserves, you must know that the mainland has bought gold for 11 consecutive months, and the official gold reserves have achieved a great increase.
From the perspective of the world, gold accounts for a very low proportion of the mainland's foreign exchange reserves, and the proportion of gold in developed countries is generally high, Russia's gold reserves account for more than 20%, while the mainland is only single digits, considering the future of RMB international trade settlement, and enhance currency stability, the mainland will continue to buy gold reserves in the future.
In addition to China's reduction of U.S. bonds, the United Kingdom and Japan reversed their holdings of more than 30 billion U.S. bonds that month, especially the United Kingdom, which bought $35.7 billion that month.
Just after the mainland sold 61.7 billion US dollars, the largest seller of US bonds "surfaced" and frantically sold $1 trillion, which is the Federal Reserve.
According to the Fed's balance sheet data, in 1 year, the Fed's balance sheet shrank by $1 trillion, including the Fed's holdings of US Treasury bonds and mortgage-backed securities (MBS).
In fact, starting in June 2022, the Fed "dumped" $95 billion a month and began the process of reducing its balance sheet. When other countries are selling U.S. bonds, why doesn't the Federal Reserve, as the central bank of the United States, increase its holdings and sell U.S. bonds instead?
The reason behind it is also very simple, the United States to suppress high inflation, the Fed must cooperate with the balance sheet reduction, the Fed sells U.S. bonds and MBS in the secondary market, buyers naturally have to pay dollars to the Fed, a large number of U.S. bonds can recover a large amount of dollars, the total amount of dollars in the market is reduced, in order to hope to reduce inflation.
Due to the crazy selling of the Federal Reserve, coupled with the continuous issuance of new bonds by the US Treasury, the US bond market has exceeded demand, short-term US bonds are sold out of stock, and long-term US bonds cannot be sold at all, resulting in the continuous decline of US bond prices, and the Fed has suffered a loss of hundreds of billions of dollars due to holding a large number of US bonds.
In fiscal 2023, the US fiscal deficit rose to $1.7 trillion, coupled with the scale of $33 trillion of debt, the US demand for funds is increasing, constantly issuing new debt, to pay off old debt, but the increase in new debt is bound to lead to an increase in debt interest costs, fiscal deficit will continue to rise, how long can such a financial game last?