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With countries liquidating US treasuries, what happens to the market as a whole?
@MFO Members: To set the record straight, Turkey's 28 Billion and Russia with 14 Billion are not major holders of U.S. Treasuries. Just remember our Treasuries will always be popular, we've never had a default Regards, Ted Major Holders Of U. S. Treasuries: http://ticdata.treasury.gov/Publish/mfh.txt
Just remember our Treasuries will always be popular
There's no such thing as "always" in securities markets. You're right that Turkey and Russia are no big deal. But China sure is. Every empire in the history of the world has eventually faded. Ours will be no exception. That doesn't mean I'm saying that Treasuries will collapse in our lifetime. But the idea that they will always be popular is absurd.
@Crash, wrong, wrong...other nations hold our treasuries for many strategic reasons and a country's decision to sell our treasuries is not our decline nor is it the reason they bought treasuries in the first place.
@LewisBraham...your next article...why do other countries hold USTreasuries?
@bee, Other countries hold US Treasury because it is considered the more stable and liquid currency in the world. Also it provides higher yield than those from the developed market: Europe yields less than 1% and Japan yields 0.09%.
@Sven, USTREASURIES also serve to control inflation as a settlement of trade for both nations. We export inflation in the form of USTREASURIES and other nations hold USTREASURIES to "reduce inflation" in their country. A currency in decline may want to sell treasuries to "increase inflation". Many currencies, including China, are in decline. reasons-why-china-buys-us-treasury-bonds
@Crash, wrong, wrong...other nations hold our treasuries for many strategic reasons and a country's decision to sell our treasuries is not our decline nor is it the reason they bought treasuries in the first place.
True, @bee. I was looking at the Big Picture, not just 10-year Treasuries, or any other US debt.
@bee, thank you. That is an interesting perspective. Wonder how the Treasury will do when the Fed starts to unwind the $1.25 trillion of mortgage-backed securities?
Maybe more worrisome is US Corporate Debt. Here's an opinion piece on the monstrous corporate debt we have as a result of investors searching for yield and corporations willing to finance all kinds of transactions with credit (issue corporate bonds as well as borrow):
The $30 trillion domestic stock market seems to get all the attention. When the stock market sets new highs, we instinctively feel things are good and getting better. When it tanks, as happened in the initial months of the 2008 financial crisis, we think things are going to hell.
But the larger domestic debt market — at around $41 trillion for the bond market alone — reveals more about our nation’s financial health. And right now, the debt market is broadcasting a dangerous message: Investors, desperate for debt instruments that pay high interest, have been overpaying for riskier and riskier obligations. University endowments, pension funds, mutual funds and hedge funds have been pouring money into the bond market with little concern that bonds can be every bit as dangerous to own as stocks.
and,
...consider the mighty AT&T — now stuffed to the gills with an estimated $180 billion in debt following its $85 billion acquisition of Time Warner. It is, according to Moody’s, the “most indebted, non-government controlled, non-financial rated corporate issuer” and one now “beholden to the health of the capital markets.” In other words, the company is so indebted that chances are high it will need continuing access to the credit markets to refinance and pay back its mountain of debt as it becomes due.
finally,
These days, junk bonds yield around 6.25 percent, meaning that investors — still desperate for yield — have overpaid for these bonds sufficiently to drive down their effective yields to levels that fail to compensate them for the risks they are taking.
When junk bond yields return to more normal levels, as interest rates rise and investors’ yield-fever breaks, the price of the bonds bought during the feeding frenzy will fall and billions of dollars stand to be lost — by endowments, pension funds and high-yield funds, among others — as bonds across the board are repriced by the market.
Comments
Regards,
Ted
Major Holders Of U. S. Treasuries:
http://ticdata.treasury.gov/Publish/mfh.txt
@LewisBraham...your next article...why do other countries hold USTreasuries?
Lately, faster and faster... three or four bricks at a time. Decline, not necessarily treasuries.
A currency in decline may want to sell treasuries to "increase inflation". Many currencies, including China, are in decline.
reasons-why-china-buys-us-treasury-bonds
Maybe more worrisome is US Corporate Debt. Here's an opinion piece on the monstrous corporate debt we have as a result of investors searching for yield and corporations willing to finance all kinds of transactions with credit (issue corporate bonds as well as borrow): and, finally, https://nytimes.com/2018/08/09/opinion/corporate-debt-bubble-next-recession.html