With holdings of $3.4 trillion, private buyers of US Treasuries set to surpass central banks | Ye Xie and Liz Capo McCormick

FOR the first time on record, private investors overseas are poised to overtake foreign central banks as the second-largest holder of US government debt.

As the US government floods the market with an unprecedented amount of debt to finance its spending, private buyers have been stepping up, easing concerns of a buyer’s strike. Investors from Canada to France are drawn to higher US yields as the Federal Reserve remains one of the last central banks to hold off cutting interest rates.

For decades, foreign central banks such as China had been the largest US creditors, occasionally raising concerns that their dumping bonds could crash the market. But more recently, their role in financing the yawning US deficit has been diminished. Instead, private investors have swooped in to fill the void as the Fed’s most aggressive tightening in decades pushed 10-year US yields up to around 4.5 percent from an all-time low of 0.3 percent in 2020. That’s compared with a 3.7-percent rate in Canada, 2.5 percent in Germany and 0.9 percent in Japan.

Source: Loan Digest (loandigest.net)

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