The global "de-dollarization" campaign has suffered a setback! The amount of U.S. bonds held by overseas investors reached a record high

Nansheng said in this life

2024-05-21 11:47Posted in Guangdong financial field creators

U.S. Treasuries are at an all-time high, and the balance of U.S. Treasuries held by both domestic and foreign investors has reached a new high. Let's take a look at the total U.S. debt, which has skyrocketed from $22 trillion before the global pandemic to 34.75 trillion today, an increase of nearly 60%.

The sell-off, which was warned by many institutions, does not seem to have materialized

Against the backdrop of the continued record high of total U.S. bonds, many institutions, including Goldman Sachs, JPMorgan Chase, Bank of America Merrill Lynch, Japan's Nomura Securities, and the International Monetary Fund, have given early warnings, reminding investors from all over the world that this bubble is very big and big, and the potential risks are also very big and great.

For example, Fitch Ratings' chief economist Kurton has said that the continued inversion of U.S. Treasury yields may significantly dampen investors' risk appetite, and the market is increasingly worried that the U.S. economy may fall into a recession in the future, which in turn will increase the risk of U.S. bond default.

Analysts at JPMorgan Asset Management, who warn that "if Treasury rates continue to rise as they are, there will be a financial catastrophe", that there is a significant risk that financial conditions will continue to tighten, and that all roads seem to point to a continued sell-off in Treasuries.

However, judging from the current situation, although a small number of countries, including China and Russia, are indeed reducing their holdings of U.S. bonds, and Russia has even "sold off its holdings of U.S. bonds to a low level that is infinitely close to zero", the balance of U.S. bonds held by investors from various countries is constantly reaching new highs.

The nature of U.S. debt has long changed

Why is this so? The U.S. Congressional Budget Office (CBO) gave their interpretation, first of all, the U.S. debt has long been internal debt, and its core holders are the Federal Reserve, various social security trust funds managed by U.S. government departments, major U.S. commercial banks, other financial institutions and many retail investors.

As of March this year, the balance of U.S. bonds held by real overseas investors was only $8,091.8 billion — less than $8.1 trillion, or about 23.3% of the total U.S. debt, and the other 76.7% were held by the United States "by its own people", who were desperately transfusing blood.

Officials from the U.S. Congressional Budget Office said that excluding investors from countries other than the United States, the U.S. public debt will shrink sharply as a percentage of GDP, that is, the proportion of U.S. foreign debt is "not as high as the major economic institutions" say. It is for this reason that they say that US debt is still safe.

The U.S. side also said that after a brief deep recession in March 2020 when the pandemic hit the world's first pandemic, the U.S. economy has recovered strongly and has maintained a good growth rate so far. The subtext is that while debt is rising, GDP is also hitting new highs.

U.S. officials have repeatedly stressed that analysts cannot just see the rise in the U.S. debt balance and not see the U.S. GDP skyrocketing. Viewers are encouraged to read the recent report of the Congressional Budget Office (CBO) on the state of the U.S. fiscal system.

Who else is desperately transfusing blood other than America's own people?

The first is Japan, whose holdings of U.S. debt expanded to $1,187.8 billion in March. As a follower of the United States, Japan is still very competent, and would rather watch its currency continue to depreciate than sell off US bonds sharply to save the yen exchange rate from slumping.

And the United Kingdom, whose balance of U.S. debt rose to $767.4 billion, compared to less than $670 billion in September last year. Canada's holdings of U.S. debt reached $359.1 billion, an increase of $78.6 billion from $280.5 billion in September last year.

There is also Luxembourg, whose balance of US debt is about to exceed $400 billion. Ireland, Belgium, France, Taiwan, Singapore, Norway, Mexico and other countries and regions have also shown varying degrees of improvement in the past year.

Compared with the above-mentioned countries and regions, the US debt held by the mainland (especially Chinese mainland) fell to US$767.4 billion, compared with US$869.3 billion in the same period last year, reducing its holdings by US$101.9 billion, becoming the largest reduction in the past year.

However, our holdings of holdings cannot withstand the increase in holdings of other countries and regions, and the total amount of U.S. bonds held by overseas investors is still at a record high.

According to data released by the U.S. Department of the Treasury, investors in other regions and countries held nearly $8.1 trillion in U.S. bonds, an overall increase of $528.7 billion compared with $7,563.1 billion in the same period last year. It seems to indicate that the global "de-dollarization" campaign has suffered a setback. This article is written by Nansheng, welcome to forward, comment, leave a message and share!

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Personal opinion, for reference only