In the first six months of this year, foreign central banks sold a net $192 billion of US Treasury bonds, more than double the pace in the same period last year, when they sold $83 billion.
China, Japan, France, Brazil and Colombia led the pack of countries dumping US debt.
It’s the largest selloff of U.S. debt since at least 1978, according to Treasury Department data.
“Net selling of U.S. notes and bonds year to date thru June is historic,” says Peter Boockvar, chief market analyst at the Lindsey Group, an investing firm in Virginia.
U.S. Treasuries are considered one of the safest assets in the world. A lot of countries keep their cash holdings in US government bonds. But with US government debt having DOUBLED during the Obama era, countries around the world are starting to think the US may NEVER be able to repay its debt and they want to get rid of it.
Many countries have been selling their holdings of US Treasuries so they can get cash to help prop up their currencies if they’re losing value.
The selloff is a sign of pockets of weakness in the global economy. Low oil prices, China’s economic slowdown and currencies losing value are all weighing down global growth, which the IMF described as “fragile” earlier in the year.
Despite all the selling by these countries, private demand for the bonds has sky rocketed. Demand is so high that the US can afford to pay historically low interest rates. The 10-year US Treasury hit a record low of 1.34% earlier this year, before bouncing back to about 1.58%, currently.
The Beginning Of The End (by Michael Snyder)
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