June 08--The U.S. Treasury next month will go back to relying on the kindness of strangers like never before to purchase the nation's burgeoning debts -- and taxpayers may have to pay higher interest rates to attract enough foreign investors, analysts say.
Though a significant rise in interest rates could be toxic for a softening U.S. economy, the Federal Reserve has said it will end its program of purchasing $600 billion in U.S. Treasury bonds as planned on June 30. The Fed is estimated to have bought about 85 percent of Treasury's securities offerings in the past eight months.
That leaves the Treasury, which is slated to sell near-record amounts of new debt of about $1.4 trillion this year, without its main suitor and recent source of support, and forces it back into the vagaries of global markets. Among the countries that will have to step forward to prevent a debilitating rise in interest rates are China, Japan and Saudi Arabia -- and even hostile nations such as Iran and Venezuela with petrodollars to invest, according to one analysis.
The central bank launched the unusual bond-buying campaign last fall in an effort to lower interest rates and boost the sagging economy -- and it was successful at drawing down long-term interest rates to record lows last winter. In particular, 30-year fixed mortgage rates fell to unprecedented lows near 4 percent and spawned a refinancing wave that helped consumers to discharge debts, purchase homes and increase spending.
http://seekingalpha.com/news-article/1235261-lack-of-buyers-may-force-treasury-to-boost-interest-rates
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