Written by Wolf Richter
China dumps Treasury securities, the Euro Area, Canada, and financial centers load up with immense appetite. The question that’s on everyone’s mind is how long foreign investors will continue to support the US Treasury debt that has now ballooned to $34.75 trillion and will nail $35 trillion over the next few months. These securities are all held by someone, and a portion of them are held by foreign entities. So far, demand for these Treasury securities from all directions has been huge, as documented by the 10-year yield that should be above 5%, given where inflation is (3.4% core CPI with lots of uncertainty surrounding it), and where short-term yields are (5.5%). But the 10-year yield is just 4.2%. The share of foreign holdings. Foreign investors have continued to add to their holdings of Treasury securities over the years, but the US debt has grown far faster, and so the share of the debt that is held by foreign entities has been declining for many years. In 2014-2016, foreign investors held over 33% of the debt. Their share is now down to 22.9%. In other words, the US debt financing has become far less dependent on foreign holders – and as we’ll see in a moment, even less dependent on China and Japan. In dollar terms, Treasury debt held by foreign entities rose to an all-time high in March, and in April dipped a tad, to $7.92 trillion, which was up by $468 billion year-over-year, or by 6.3%, according to Treasury Department data on Tuesday (red line in the chart below). Top six financial centers (London, Belgium, Luxembourg, Switzerland, Cayman Islands, Ireland): $2.3 trillion (blue), +9.2% year-over-year, despite a dip in April from the all-time high in March. Japan, #1 US creditor: $1.15 trillion (green), +2.2% from a year ago….
Sourced from PRICKLY PEAR
