Americas Biggest Creditors Dump Treasuries in Warning to Trump

[Sgent]

Source: Bloomberg

In the age of Trump, America’s 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 Finance’s most recent figures show. What’s striking is the selling has persisted at a time when going abroad has rarely been so attractive. And it’s 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 it’s the prospect of bigger deficits and more inflation under President Donald Trump or higher interest rates from the Federal Reserve, the world’s safest debt market seems less of a sure thing -- particularly after the upswing in yields since November. And then there is Trump’s 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]

1. Drip, drip, drip.

[littlemissmartypants]

2. Worrying. nt

[littlemissmartypants]

3. We should all be paying attention to this. nt

[tenorly]

13. We certainly should.

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]

25. So what do I do if I have been buying T-Bills-- 2,6,9 months.????

Buying not for the income, it's a pittance, but for 'safety."

[tenorly]

43. Well, I wouldn't worry for the time being.

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]

45. Thanks for the advice...

[tenorly]

48. You bet.

When things get a little unhinged I look at Short ETFs as well.

Peace (and prosperity!)

[Beakybird]

4. What does this mean macroeconomically?

[Bernardo de La Paz]

6. It means (see within...). Whatever you do, don't ask tRump. He doesn't have a clue.

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]

7. Well actually higher interest rates will hurt Trump's business

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]

12. It wont impact him or the Repugnants in Congress as much as it would most of us here on the DU.

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]

16. He's counting on foreign diplomats and the secret service to pay the property bills.

[Eyeball_Kid]

31. Then look out for war.

[GeoWilliam750]

23. Actually

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]

28. I have been buying T-Bills- 3,6,9,12 mo... for 'safety,' rather than income, of course.

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]

32. Prices for shorter dated fixed income instruments

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]

42. T-Bills will remain the safest investments

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]

44. Thanks.. safety is my goal.. not income...at this pont

My only concern was fuckwad's threat to 'pay out 70% on the dollar' for treasuries.

[pangaia]

46. Thanks wish.... That's what I figured...

Just was a little concerned about fuckwad threatening to only pay out 70% on the dollar.. as I mentioned in another reply...

[wishstar]

56. There's some premature over-the-top panicking

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]

58. I'm one of those "premature over-the-top panicking"

Stashing cash in a safe... My bank is very solid, very highly rated regional bank but... until things blow over...........OR.... blow up.

[sheshe2]

5. Heck of a job trumpie!

Ya sure are making amurikkka great again.

[mpcamb]

41. Feels like he's got the bus hurtling toward the cliff at breakneck speed...

And we're only 20-some days into this.

[moondust]

8. Elections have consequences.

Probably lots of people overseas scratching their heads.

Are American voters crazy, stupid, or corrupt? Maybe all three?

[Beartracks]

60. Never underestimate the apathy and/or gullibility...

... of Americans in large numbers.



=================

[pbmus]

9. And little trumpets money doesn't buy as much bud light with interest rates higher..!!

[Beakybird]

10. Oy ve

What Frankenstein has America brought to life?

[Best_man23]

11. And here comes the sell off.

Felt like this would happen, just not this soon.

[Blue Idaho]

14. Well, this certainly will teach 45 the difference between

A weak and strong dollar... Since this lousy real estate salesman doesn't know which benefits Americans more...

[mahina]

20. How might we expect this to affect money market shares?

Mahalo!

[Generic Brad]

15. We can't stop him, but the world can

That is our final hope. But we will suffer while it shakes out.

[Crash2Parties]

17. Perhaps they realize he may well only pay back 70% of face value just as he promised in the campaign

[keithbvadu2]

21. "only pay back 70% of face value" --- Saw this idea last year.

Much of America's debt is held by Americans.

Won't we be happy for Trump to shortchange our investments/savings?

[Fast Walker 52]

40. uh, NO.

that would be a disaster of the highest order.

[pangaia]

47. DISASTER is the intent of Bannon, Dugin, Putin, etc....

[NewJeffCT]

55. I believe that's unconstitutional

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]

18. Aren't there any

...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]

27. Nope. They're diversified to the hilt.

In fact, they'd probably welcome a financial collapse. Makes assets cheaper to buy.

[zentrum]

33. I see your point

.....but they have many wealthy donors who would be hurt by a collapsed economy.

[Yavin4]

34. Wealthy people don't give a shit about other wealthy people

It's all about them.

[yuiyoshida]

19. and so it begins...

[not fooled]

54. We don't call him "dump"

For nothing.

[ProudLib72]

22. How aggresively will the Fed respond?

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]

29. The Fed will have no choice but to use QE to keep interest rates low.

If we even go to a 3 or 4 percent rate on Treasury paper, the interest on the debt will be HUUUUGE.

[Historic NY]

24. I left the market just after thanksgiving.....

took the profits out. The broker said when the crash comes its going to be specticular.

[pangaia]

30. I started buying 3,6,9,12 mo T-Bills in November...

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]

26. Allow me to interpret this article

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]

35. Likely consequences

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]

36. Might be a shot across the bow.

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]

37. No sensible person, or bank, will trust the Republicans and their

republican draft-&-tax dodger-in-chief. They are too frikken sleazy.

[DeminPennswoods]

38. Bond prices/yields

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]

39. ok, I'm tired of all this "winning"-- can we stop "winning" now?

but seriously, this is really bad, and likely just the beginning.

[Crowman2009]

49. Well the bright spot is that Trumpy will have a hard time financing any future wars...

...he wants to start.

[Bayard]

50. Or his wall

[hollowdweller]

51. Ironic that the GOP has always said Dems would bring inflation

Looks like the collapse they predicted democrats would bring will come from their man.

[DetlefK]

52. WH will denounce this as fake news in 3... 2 ... 1 ...

[heaven05]

53. deep, deep, very serious

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]

57. K&R

[czarjak]

59. Eight of the last nine recessions....

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?