On May 9, local time, the Federal Reserve announced its latest balance sheet.
According to the latest data released by the Federal Reserve, as of May 8, 2024, the balance of U.S. bonds held by the Federal Reserve has dropped to about $4.52 trillion, a decrease of $15.436 billion compared with last week, a decrease of $704.574 billion compared with the same period last year, and a decrease of $1.25 trillion compared with about $5.77 trillion at the peak in mid-June 2022, which is equivalent to about two years, and the Fed has sold more than 20% of its U.S. bonds.
At the beginning of 2020, the balance of U.S. bonds held by the Fed was only about $2.33 trillion, but by mid-2022, it had quickly soared to $5.77 trillion, more than doubling in more than two years.
It's just that since March 2022, in the face of high inflationary pressure, the Federal Reserve has officially opened the channel of raising interest rates, and in order to cooperate with the promotion of policy, the Federal Reserve has also begun to continue to sell US bonds to recover US dollars.
In the past year, many countries, including Japan, the United Kingdom, Luxembourg, Canada, France, Ireland and other countries, have increased their holdings of U.S. bonds, among which Canada has increased its holdings of U.S. bonds by as much as $118.5 billion a year, and France has also increased its holdings of more than $100 billion.
In addition to these good friends of the United States to increase their holdings of U.S. bonds, some professional investment institutions have also increased their holdings of U.S. bonds, among which Warren Buffett is a loyal supporter and receiver of U.S. bonds.
In recent years, Warren Buffett has been very optimistic about the investment value of U.S. bonds, and he is strongly supportive of U.S. bonds.
At the Berkshire Hathaway shareholder meeting held a few days ago, Warren Buffett expressed his views on the position of U.S. bonds and the U.S. dollar in particular, and when asked whether he was worried that the rising debt level would affect the credibility of U.S. Treasury bonds, Buffett believed that U.S. Treasury bonds will remain acceptable in the foreseeable future, because of the lack of real alternatives to U.S. bonds and the U.S. dollar in the current international market.
Moreover, Buffett not only believes in U.S. bonds and the U.S. dollar in his mouth, but also supports it with practical actions, and in the context of the Fed's continued sell-off of U.S. bonds, the balance of U.S. bonds held by Buffett continues to rise.
According to Berkshire Hathaway's financial report data for the first quarter of 2024, as of the end of the first quarter, Berkshire Hathaway's cash reserves were as high as US$189 billion (about 1.36 trillion yuan), of which US$35.55 billion in monetary cash was directly held and US$153.44 billion was held in short-term U.S. bonds, an increase of US$23.84 billion from US$1,296 at the end of the fourth quarter of 2023.
In addition, at the end of the first quarter of 2020, Berkshire Hathaway's holdings of U.S. Treasury bonds were only $105.5 billion, which is equivalent to four years, and Berkshire Hathaway's U.S. bonds increased by 45.4%, with an average annual growth rate of more than 11%.
It can be seen that Buffett is very fond of U.S. bonds and is full of confidence in U.S. bonds, and his decision has also brought him considerable returns.
Although the yield of US Treasury bonds continued to decline before 2022, after entering March 2022, as the Fed entered the path of interest rate hikes, the yield of US Treasury bonds also continued to rise, which also brought considerable gains for Buffett.
For example, in 2023, Berkshire Hathaway's net profit will be as high as $96.223 billion, making it one of the most profitable companies in the world, and part of this is the income from U.S. bonds.
As for how much U.S. bond investment has brought to Buffett in 2023, we haven't seen specific data, but there is an undeniable fact that the yield on U.S. bonds has continued to rise in recent years.
As of now, the yield on two-year Treasury bonds is around 4.8%, the yield on 10-year Treasury bonds is around 4.45%, and the yield on 30-year Treasury bonds is around 4.6%.
Although this yield is not as good as the income brought by the stock market, but the biggest feature is relatively stable, according to the balance of U.S. bonds held by Berkshire Hathaway, the income obtained last year reached at least about 5 billion US dollars, this income is still considerable, no wonder Buffett will continue to increase his holdings of U.S. bonds.
But globally, not everyone is as bullish on U.S. Treasuries as Warren Buffett, and many countries continue to sell U.S. Treasuries despite rising yields in recent years.
For example, from February 2023 to February 2024, China has reduced its holdings of U.S. bonds by about $74 billion, and some countries, including Belgium and Switzerland, have also reduced their holdings of U.S. bonds to varying degrees.
And as some economic data in the United States began to decline, the market's expectations for the Fed to cut interest rates are increasing, once the Fed enters the interest rate cut channel in the future, the US Treasury yields will fall, and the market will follow a large number of sell-offs.