07/04/17

If The Fed Sells Treasuries... Who Will Be Buying? Answer: "Other" (Seriously)! [feedly]



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If The Fed Sells Treasuries... Who Will Be Buying? Answer: "Other" (Seriously)!
// Zero Hedge

Authored by Chris Hamilton via Econimica blog,

From 1776 through 2007, the US issued just over $9 trillion in US Treasury debt to pay for stuff which "we" wanted but "we" were unwilling to tax ourselves to pay for.  The buyers during that period are depicted in the first column of the chart below.  During that time, the majority buyer of that debt was the Intra-Governmental Surplus funds (primarily Social Security) as depicted by the green area in the first column below.  These funds were mandated to buy "governmental accounting series" non-marketable debt.  The remainder of the issuance and holdings were fairly evenly split between foreigners and domestic buyers (primarily institutional buying) with a minor portion of primarily short term Notes and Bills held by the Federal Reserve.

From 2008-->2014, the US Treasury nearly issued as much debt as it had in the previous 230+ years.  But the proportions bought and held by these creditors significantly changed (depicted by middle column in the chart below).  Intra-Governmental surplus funds were dwindling so the buyer of nearly half of all Treasury debt up to that point took a back seat, buying only 8% of the new issuance.  No surprise, it was the Federal Reserve and Foreigners that bought 2/3rds of the issuance, maintaining a strong bid.  The Fed sold all it's short term bills and notes and went large and long.  And foreigners apparently just couldn't get enough.

But since QE ended in late 2014, the make-up of the new buyers / holders of US Treasury debt is totally different (depicted in the right column of the chart below).  Obviously, the Fed Reserve has purchased nothing (on a net new basis...of course they have been buying to replace bonds rolling off, but no net new buying) and since the Fed ceased buying, Foreigners (net) have sworn off US Treasury debt and sold $200+ billion.  So the only buyers for the continuing issuance and the portion not rolled over by foreigners  is the domestic public (with an assist by the dwindling Intra-Governmental surplus).

On a % basis of who bought / held the debt over different periods?  The chart below ....

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