The US Treasury Department report for April published on June 15 revealed that Russia sold $47.4 billion out of the $96.1 it had held in Treasury bonds (T-bonds). In March, Moscow cut its Treasury holdings by $1.6 billion. In February, Russia reduced its bond portfolio by $9.3 billion. Other holders did it too. Japan sold off about $12 billion, China liquidated roughly $7 billion. Ireland ditched over $17 billion.
The tariff wars unleashed by Washington stirred fears that financial markets may be in for a rough ride with American treasuries dumped by some partners, including such major holders as China and Japan, each holding over $1 trillion in bonds.
Russia has cut its holdings in American securities following numerous rounds of sanctions imposed by Washington against Moscow and amid the ongoing trade wars between the US and its allies and partners.
This is bad news and ominous warning for Washington. The foreign demand is critical to offset an expected surge in federal borrowing needs. The Treasury Department needs to finance the huge spending bill along with tax cuts that were passed by Congress in December 2017. It plans to auction off around $1.4 trillion in treasuries this year with a glut of sellers and a shortage of buyers in the bond market the government plans to add $600 billion to.
The companies buy back their own shares to boost capitalization. The stock prices are overvalued. The FRS monetary policy does not spur economic growth amid the growing national debt. The bond market does not look attractive anymore. Looks like there is a big change on the horizon that nations will dump US debt in case of trade war.
And the supremacy of the US dollar is not as solid as many people believe it is. A sell-by date as a global reserve currency is looming. The process of de-dollarization is gradually gaining momentum.
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