Foreign governments dump U.S. debt at record rate

CNN ^ | 17 March 2016 | Matt Egan

[Lorianne]

In a bid to raise cash, foreign central banks and government institutions sold $57.2 billion of U.S. Treasury debt and other notes in January, according to figures released on Tuesday. That is up from $48 billion in December and the highest monthly tally on record going back to 1978.

It's part of a broader trend that gathered steam last year when central banks sold a record $225 billion of U.S. debt.

"Foreigners have no longer been our BFF when it comes to buying U.S. Treasuries," Peter Boockvar, chief market analyst at The Lindsey Group, wrote in a client note.

So what are foreign central bankers doing with these piles of cash? They're mostly using the funds to stimulate their own economies as the global growth slowdown and crash in oil prices continue to take their toll.

For instance, China has been liquidating its holdings of foreign debt to pump money into its slowing economy, plummeting currency and extremely volatile stock market. China, the largest owner of U.S. debt, trimmed its Treasury holdings by $8.2 billion in January, the Treasury Department said. The actual decline was likely larger considering China reported selling $100 billion of foreign-exchange reserves in January.

[JohnBrowdie]

china’s economy is circling the bowl. when it goes “splat”, it’s going to be one hot mess.

[ronnie raygun]

Maybe why china is building up more militarily

[Pining_4_TX]

Who or what is doing the buying? This stuff mystifies me.

[DoughtyOne]

[Ken522]

Foreigners selling dollars should reduce the value of the dollar on the international market, weakening the dollar and making US exports more affordable to foreigners, or at least that’s how it’s supposed to work in classical economics ...

[EEGator]

You know what mystifies me? The fact that an investment professional wrote “BFF” in an official letter.

[VerySadAmerican]

I don’t understand a bit of this. I know how a mortgage can sell it’s notes to other investors. But how do you sell a debt? Who is willing to buy it? And should I be concerned?

[livius]

That’s what’s happening. The dollar is getting weaker, which means products will be more expensive for us.

[proxy_user]

So, have interest rates on typical maturities like 5-year and 10-year gone up in the past year?

5-year: year ago - 1.37%, today - 1.33%
10-year: year ago - 1.91%, today - 1.87%

So it seems like there is no shortage of buyers overall.

[Bogie]

That’s right on. The Communist country is going to go fascist.

[montag813]

This is coordinated. Federal reserve banks are driving down the dollar. This is just one cog in that wheel.

[Vince Ferrer]

I don’t think this signals something bad for us. Dollar denominated debt is very valuable right now because other currencies are falling against the dollar, such as China. This is probably more a case of weak hands forced to cash in investments because they need the money, especially oil producing countries.

[zzwhale]

butttttt the USSA is ONLY $19 TRILLION IN DEBT
with no forseable awy to pay it off

no one yell fire in this financial theater.............
cause there aint NO WAY OUT.......

[expat_panama]

interest rates on typical maturities like 5-year and 10-year gone up in the past year?

Actually they have, big time   4-week T-bill went for zero % (!) in Sept., and .01 in Oct., it's now at 0.25%   3-month jumped more than that and the rise is across the board into 1-year T-bills.  What this means is U.S. gov't interest payments will soar five-fold from the current $230B to $1T and change.  Just in time for the new president.  Hey, nobody wanted zero interest rates and easy money so this is the alternative.

[combat_boots]

From 250Bn to 1T.

We’re in for a rough 2017-and beyond-if we don’t elect Trump and get a federal budget in place.

We have not had a federal budget since 2009. We have doubled our debt. We will be at $20T in debt by 2017.

[proxy_user]

Those short maturities are heavily influenced by the Fed’s raising of the overnight rate. If they’re paying .25% for overnight money, who would buy a three-month at .05%?

[wiggen]

One sells treasuries to get dollars. Thats demand. The other point is its not just our debt being sold.

[wiggen]

While you’re right about servicing our debt thats always been the boogey man in QE. From a consumer and business side the rate is sill negligible.

[expat_panama]

...our debt thats always been the boogey man in QE. From a consumer and business side the rate is sill negligible.

No, it's the Fed that's been the false boogieman and the upcoming interest payments will devastate us  --it's because hating bankers is easy and math is hard.   Here's the math anyway:

 What's been happening is that before O interest rate (red line) would go down and payments would go down.  That worked out 'cause inflation would go down which made payments harder (the debt stayed big).  Now we got interest being SUPER low but payments stayed up becuase of the enormous spending --and w/ the return of high interest those payments will soar w/o inflation to make the debt meaningless.  Inteest payments will add over a $T to the debt.  Each year.  Paying the debt can be put off but interest can't and that means soaring taxes, spending cuts.  More voters get hurt by spending cuts than by tax hikes to us tax payers will be shafted.  And quit.

This will not end well.