Americas Biggest Creditors Dump Treasuries in Warning to Trump
Source: Bloomberg
In the age of Trump, Americas biggest foreign creditors are suddenly having second thoughts about financing the U.S. government.
In Japan, the largest holder of Treasuries, investors culled their stakes in December by the most in almost four years, the Ministry of Finances most recent figures show. Whats striking is the selling has persisted at a time when going abroad has rarely been so attractive. And its not just the Japanese. Across the world, foreigners are pulling back from U.S. debt like never before.
From Tokyo to Beijing and London, the consensus is clear: few overseas investors want to step into the $13.9 trillion U.S. Treasury market right now. Whether its the prospect of bigger deficits and more inflation under President Donald Trump or higher interest rates from the Federal Reserve, the worlds safest debt market seems less of a sure thing -- particularly after the upswing in yields since November. And then there is Trumps penchant for saber rattling, which has made staying home that much easier.
It may be more difficult than usual for Japanese to invest in Treasuries and the dollar this year because of political uncertainty, said Kenta Inoue, chief strategist for overseas bond investments at Mitsubishi UFJ Morgan Stanley Securities in Tokyo. Treasury yields may rise rapidly again in the near future, which will continue to discourage them from buying aggressively.
Read more: https://www.bloomberg.com/news/articles/2017-02-12/america-s-biggest-creditors-dump-treasuries-in-warning-to-trump
old guy
(3,284 posts)littlemissmartypants
(22,839 posts)littlemissmartypants
(22,839 posts)tenorly
(2,037 posts)Especially because this miscreant is: http://www.democraticunderground.com/10027587144
Argentina was just a warm-up act for him (his Cayman Islands laundrette NML bagged $2.4 billion last year on old defaulted bonds, for an 1180%+ return).
If Trump or Congress manufacture a technical default, like the kind Eric Cantor almost did in 2011, he - and other vultures like the infamous John Paulson - will be the first to try to extort the U.S. Treasury for astronomical payouts.
How? They can block everyone else's U.S. bond interest income, for years if need be, until they collect what they think they're owed.
pangaia
(24,324 posts)Buying not for the income, it's a pittance, but for 'safety."
tenorly
(2,037 posts)Just keep an eye on the news - and on Trump in particular - for indications that someone got it in his head to interfere with the bond market.
If you start hearing frequent bellowing by Cheeto along the lines that "we're not going to be taken advantage any more by China", plus executive orders to that effect, then I'd start to worry.
pangaia
(24,324 posts)When things get a little unhinged I look at Short ETFs as well.
Peace (and prosperity!)
Beakybird
(3,333 posts)Bernardo de La Paz
(49,047 posts)Basically, if holders are dumping Treasuries, it means the price goes down. When the price goes down, you have to raise the interest rate to counteract that so that investors can make their money and become encouraged again to buy them.
Higher interest rates means higher mortgage rates. That means fewer housing starts and fewer jobs.
Higher interest rates means higher car loan rates. That means less manufacturing / sales and fewer jobs.
Higher interest rates means the cost of doing business rises and businesses don't have capital to expand as much.
Of course, higher rates doesn't affect Дональда Джона Трампа (Donald John Trump) because US banks won't lend to him. He probably has a bunch of Russian loans, and releasing or obtaining (via Congressional action) his tax returns may resolve that question.
titaniumsalute
(4,742 posts)As the economy slows down...fewer people to pay ridiculous amounts to stay in his hotels, play his golf courses, get married or have conferences at his hotels, pay rent in his apartments, etc.
Plus there's that pesky 2018. Two things move people's moods more...WAR and ECONOMY. With an approval rating already at 40% let's see what happens when the stock market plunges 5,000 points and unemployment shoots up. 30% maybe? While that might be good for Dems politically, that will really suck for many Americans with 401Ks, other investments, and jobs.
cstanleytech
(26,334 posts)Of course I am willing to wager that alot of the Repugnants in Congress are counting on crashing the economy on purpose and then using things like private equity companies and offshore companies to buy up varies properties like peoples homes that get foreclosed on due to Repugnants forcing alot of people to have to file bankruptcy after they crash the economy.
Crash2Parties
(6,017 posts)Eyeball_Kid
(7,434 posts)GeoWilliam750
(2,522 posts)Higher interest rates mean lower asset values. This means that his properties have already declined in value, as has any long term tangible fixed asset.
Also, long term bonds in pension funds will see a decline in market value, potentially resulting in the value of fund assets being less than a pension fund's obligations.
pangaia
(24,324 posts)Which I will re-invest as they mature...
What happens to those..other than higher return rates as I buy new ones as rates go up?
Still 'safe?"
GeoWilliam750
(2,522 posts)Are much less sensitive to interest rate movements. Thus, if interest rates continue to rise, and longer lived assets fall accordingly, the short term instruments will be much less affected, especially at the very short end.
wishstar
(5,272 posts)Next safest is CD's at 5-Star banks that are FDIC insured and easy to get interest out when needed. I shop around for best rates using Bankrate .com website whenever I need to reinvest.
pangaia
(24,324 posts)My only concern was fuckwad's threat to 'pay out 70% on the dollar' for treasuries.
pangaia
(24,324 posts)Just was a little concerned about fuckwad threatening to only pay out 70% on the dollar.. as I mentioned in another reply...
wishstar
(5,272 posts)A couple of DUers have even mentioned taking their money out of banks and keeping large amounts of cash at home.
Very bad idea to stash much at home, although great to have some cash on hand for emergencies or natural disasters etc.
pangaia
(24,324 posts)Stashing cash in a safe... My bank is very solid, very highly rated regional bank but... until things blow over...........OR.... blow up.
sheshe2
(83,954 posts)Ya sure are making amurikkka great again.
mpcamb
(2,878 posts)And we're only 20-some days into this.
moondust
(20,016 posts)Probably lots of people overseas scratching their heads.
Are American voters crazy, stupid, or corrupt? Maybe all three?
Beartracks
(12,821 posts)... of Americans in large numbers.
=================
pbmus
(12,422 posts)Beakybird
(3,333 posts)What Frankenstein has America brought to life?
Best_man23
(4,910 posts)Felt like this would happen, just not this soon.
Blue Idaho
(5,060 posts)A weak and strong dollar... Since this lousy real estate salesman doesn't know which benefits Americans more...
mahina
(17,715 posts)Mahalo!
Generic Brad
(14,276 posts)That is our final hope. But we will suffer while it shakes out.
Crash2Parties
(6,017 posts)keithbvadu2
(36,962 posts)Much of America's debt is held by Americans.
Won't we be happy for Trump to shortchange our investments/savings?
Fast Walker 52
(7,723 posts)that would be a disaster of the highest order.
pangaia
(24,324 posts)NewJeffCT
(56,829 posts)I think the 13th or 14th amendment forbids America's debt to be questioned. So, if the Reagan/Bush/Trump debt becomes too big, they'd print more money to cover the costs, further weakening the dollar and driving up inflation.
zentrum
(9,865 posts)...Repugs at all that give a damn about the country that will step up and do something with the Dems to stop this monster?
Don't the Kochs and Addleson give a damn about the full faith and credit of the USA?
On the other hand, I think Bannon really, really gets off on having the power to move world markets.
Yavin4
(35,450 posts)In fact, they'd probably welcome a financial collapse. Makes assets cheaper to buy.
zentrum
(9,865 posts).....but they have many wealthy donors who would be hurt by a collapsed economy.
Yavin4
(35,450 posts)It's all about them.
yuiyoshida
(41,867 posts)not fooled
(5,803 posts)For nothing.
ProudLib72
(17,984 posts)Do you think they might artificially raise interest rates to counteract market trends in the foreseeable future? In other words, is there evidence they are gearing up to battle the effects of tRump? I ask this because I can imagine the market going on a roller coaster ride for the next few years and the only antidote to recession is with the Fed reacting extremely quickly or preemptively. Anyway, without confidence from foreign investors, tRump will get his ideal of isolationism (at least for other American companies, not his).
roamer65
(36,747 posts)If we even go to a 3 or 4 percent rate on Treasury paper, the interest on the debt will be HUUUUGE.
Historic NY
(37,454 posts)took the profits out. The broker said when the crash comes its going to be specticular.
pangaia
(24,324 posts)I am not concerned with the return rate on those as I just bought for the 'safety.'
But, now I am even worried about the safety of those T-Bills..
Can fuckwad REALLY direct the Treasury to only pay 70% on bills/bonds like he threatened?
Yavin4
(35,450 posts)The rest of the world is not stupid like the idiot Americans that voted for Trump. They see that he, and his administration, are complete incompetents, and you don't loan money to incompetent management.
no_hypocrisy
(46,234 posts)High interest rates
Less borrowing
Repayment of existing loans go more to interest, less to principal
Higher taxes to garner more revenue
Raids on Social Security, Medicare, and Medicaid for holes in budget
AJT
(5,240 posts)Warning the government to get their sh!t together. Maybe what's left of the responsible people can distract 45 with something shiny while others try and straighten things out.
Achilleaze
(15,543 posts)republican draft-&-tax dodger-in-chief. They are too frikken sleazy.
DeminPennswoods
(15,290 posts)This is true for all bonds, not just T-bills. Bond prices and yields move inversely to each other. When bond prices are high, yields are low. When bond prices are low, yields are high.
If you're invested in T-bill funds, most mutual funds try to keep the value of 1 share at $1, so the fund doesn't increase/decrease in overall value.
If no one wants T-bills, the treasury will have to offer higher yields, which have been near/at historic lows for years. This will benefit investors by giving them higher interest income. This will also likely result in things like bank checking/saving/CD to have higher interest payments.
The down side is that mortgages and other loans will carry higher interest. The federal gov't's debt service will increase, too.
However, overall inflation has been so low, it's not necessarily a bad thing if interest rates rise.
Fast Walker 52
(7,723 posts)but seriously, this is really bad, and likely just the beginning.
Crowman2009
(2,499 posts)...he wants to start.
Bayard
(22,181 posts)hollowdweller
(4,229 posts)Looks like the collapse they predicted democrats would bring will come from their man.
DetlefK
(16,423 posts)heaven05
(18,124 posts)trouble is brewing on high heat, boil over sooner or later, I opt for sooner. Unless these clowns are somehow put out to pasture...we are ALL going to suffer...because of our own hateful ameriKKKan nature that allowed so many votes for this disaster of a racist, arrogantly stupid and blind administration. DAMN!!!!!!!!!!!
Yo_Mama_Been_Loggin
(108,304 posts)czarjak
(11,301 posts)Started under republican administrations. What are the odds? Oh yeah, 88.9999999...% to 11.1111111...% we're headed for recession. Who'd a thunk it?