A record drop in foreign holdings of U.S. Treasury bills in December sent a reminder that the government might have to pay higher interest rates on its debt to continue to attract investors.
China reduced its stake and lost the position it’s held for more than a year as the largest foreign holder of Treasury debt. Japan retook the top spot as it boosted its Treasury holdings.
China dumped some $34.2 billion – other foreign investors following China’s lead raise that total to $53 billion.
Interest rates will be going up, probably soon.
There are signs that US Treasuries are not finding the usual demand from buyers.
Longer dated bills were under more pressure Tuesday morning and afternoon as concern grew that the Treasury market is no longer able to support continued weeks of record debt auctions.
The worries were sparked last Thursday, when the government sold $16 billion worth of 30-year bonds. The bid-to-cover ratio, a measure of demand, was 2.36. That was down from 2.68 at the previous auction in January.
You should be troubled by this. If the United States can’t sell enough bonds to cover the skyrocketing Obama debt, we are all in real trouble. The right answer is to cut spending and hence the amount of debt we are trying to sell, but that will not happen with this administration and Congressional leadership.
Pray we can hold on until November.