Peak Oil News and Message Boards

Central banks are dumping America's debt at a record pace.

China, Russia and Brazil sold off U.S. Treasury bonds as they tried to soften the blow of the global economic slowdown. They each sold off at least $1 billion in U.S. Treasury bonds in March.

In all, central banks sold a net $17 billion. Sales had hit a record $57 billion in January.

So far this year, the global bank debt dump has reached $123 billion.

It's the fastest pace for a U.S. debt selloff by global central banks since at least 1978, according to Treasury Department data published Monday afternoon....

Treasuries are considered one of the safest assets in the world, but some experts say a sense of panic about the global economy drove the selloff.

"It's more of global fear than anything," says Ihab Salib, head of international fixed income at Federated Investors. "There's still this fear of 'everything is going to fall apart.'"

Judging by the selloff, policymakers across the globe were hitting the panic button often and early in the year as oil prices fell, concerns about China's economy rose and stock markets were very volatile.

In response, countries may be selling Treasuries to prop up their currencies, some of which lost lots of value against the dollar last year. By selling U.S. debt, central banks can get hard cash to buy up their local currency and prevent it from losing too much value.

Also, as investors have pulled money out of developing countries, central bankers seek to replenish those lost funds by selling their foreign reserves........

vtsnowedin wrote:So the central banks are selling off those bonds, Who is buying them?

f anything, demand is still high for U.S. Treasury bonds -- it's just coming from private investors. The yield on a typical 10-year bond is just 1.76%, which is very low.

"While central banks may be selling Treasuries to support their currencies, investors seek the safety of Treasuries at the same time," says Jeff Kleintop, chief global investment strategist at Charles Schwab.

Tanada wrote:

vtsnowedin wrote:So the central banks are selling off those bonds, Who is buying them?

It is at the very bottom of the linked article,

f anything, demand is still high for U.S. Treasury bonds -- it's just coming from private investors. The yield on a typical 10-year bond is just 1.76%, which is very low.

"While central banks may be selling Treasuries to support their currencies, investors seek the safety of Treasuries at the same time," says Jeff Kleintop, chief global investment strategist at Charles Schwab.

GHung wrote:U.S. debt dump deepens in 2016

Central banks are dumping America's debt at a record pace.

China, Russia and Brazil sold off U.S. Treasury bonds as they tried to soften the blow of the global economic slowdown. They each sold off at least $1 billion in U.S. Treasury bonds in March.

In all, central banks sold a net $17 billion. Sales had hit a record $57 billion in January.

So far this year, the global bank debt dump has reached $123 billion.

It's the fastest pace for a U.S. debt selloff by global central banks since at least 1978, according to Treasury Department data published Monday afternoon....

Treasuries are considered one of the safest assets in the world, but some experts say a sense of panic about the global economy drove the selloff.

"It's more of global fear than anything," says Ihab Salib, head of international fixed income at Federated Investors. "There's still this fear of 'everything is going to fall apart.'"

Judging by the selloff, policymakers across the globe were hitting the panic button often and early in the year as oil prices fell, concerns about China's economy rose and stock markets were very volatile.

In response, countries may be selling Treasuries to prop up their currencies, some of which lost lots of value against the dollar last year. By selling U.S. debt, central banks can get hard cash to buy up their local currency and prevent it from losing too much value.

Also, as investors have pulled money out of developing countries, central bankers seek to replenish those lost funds by selling their foreign reserves........

More: http://money.cnn.com/2016/05/16/news/ec ... -stack-dom

Doesn't seem to bode well for the US Dollar hegemony.... Other repercussions?

jedrider wrote:Just saw the DVD movie "The Big Short" on the housing bonds failure in 2008. They had an explanation of how this is possible: Corruption or blindly ignoring reality, which really are the same thing if you are a banker.

jedrider wrote:U.S. interest rates CANNOT go up without crashing the economy and the housing market in particular.

Just saw the DVD movie "The Big Short" on the housing bonds failure in 2008. They had an explanation of how this is possible: Corruption or blindly ignoring reality, which really are the same thing if you are a banker.

shortonoil wrote:"Something is wrong"

Against the US GDP of $17.3 trillion, $123 billion is 0.0071%. Peanuts. Against the US total asset value of $577 trillion it is nothing. We are now in the era of return of capital, not return on capital. Investors from around the world will go where ever they think money is the safest. The wealthiest nation on earth is a good place to start.

misterno wrote:

shortonoil wrote:"Something is wrong"

Against the US GDP of $17.3 trillion, $123 billion is 0.0071%. Peanuts. Against the US total asset value of $577 trillion it is nothing. We are now in the era of return of capital, not return on capital. Investors from around the world will go where ever they think money is the safest. The wealthiest nation on earth is a good place to start.

That is not what I said

I said if people are dumping US bonds, then how come I am not seeing bond prices going down and interest rates going up?

The $9.1 billion spending plan unveiled Monday allocates $209 million for interest payments on commonwealth debt. That’s just 15 percent of the $1.39 billion of principal and interest that Puerto Rico owes from its general fund in the fiscal year starting July 1, including $1 billion for general obligations, according to Luis Cruz, the island’s budget director.

The budget proposal is a signal that instead of earlier attempts to find cash to meet general obligation deadlines, the administration is now focused on paying public workers and programs before bondholders, said Daniel Hanson, an analyst at Height Securities, a Washington-based broker dealer.
Debt Service
“This is a pretty strong statement that they’re not going to even try to pay anymore,” Hanson said. “In some ways he’s threatening bondholders and saying ‘come and sue us.”’

Revi wrote:Don't feel too bad. I got these utilities that were supposed to be good from my retirement broker. She said that they were for those who were "risk averse". I pictured them as similar to the utilities on the monopoly board. Get 4x roll of dice, etc. It turned out that they were mostly Enron and I lost over $1000. A fool and his money are quickly parted. The painful part is that I could have lived a month or two on that. C'est la vie.

Revi wrote:Don't feel too bad. I got these utilities that were supposed to be good from my retirement broker. She said that they were for those who were "risk averse". I pictured them as similar to the utilities on the monopoly board.