Why has the U.S. Treasury bond suddenly lost its buyers? What is the reason behind the rise in U.S. Treasury yields? Has Japan intervened?
U.S. Treasury bonds, nobody is buying them anymore?
The latest data shows that the yield on U.S. Treasury bonds has risen from 3.7% a few days ago to nearly 4.1%, and the sustained high level of U.S. Treasury yields has led to an increase in U.S. financing rates and a continued inflow of global capital. The impact of the U.S. interest rate hike cycle on the global economic recession is still ongoing.
More importantly, most developing countries still rely on international capital such as the U.S. dollar, which means that the sickle of U.S. dollar hegemony is still harvesting most countries.
The yield on 10-year U.S. Treasury bonds continues to rise.
So, why is the sickle of U.S. dollar hegemony still harvesting? Hasn't the U.S. interest rate hike this time most likely come to an end? There are mainly two major reasons.
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The first major factor is the continuous improvement of the U.S. economy.
Looking at the recent economic growth rate, the U.S. GDP growth rate in the first quarter was 2%, while the economic growth rate in the second quarter was 2.4%, exceeding market expectations. Some people marvel at the United States as a veteran capitalist country, while others accuse the U.S. Bureau of Statistics of data fraud.
Traditionally, whether it is manufacturing or the service industry, when the economy grows, electricity consumption will increase significantly. However, while the U.S. economy is growing, the electricity consumption in the United States this year is 3% lower than the same period last year, which is obviously not logical.
The decline in U.S. electricity generation, but the growth of the economy, does not make sense and is suspected of data fraud.Regardless of whether the U.S. economic data is falsified or not, the nominal economic strength can support the United States in continuing to maintain a relatively high level of Treasury bond interest rates to suppress inflation. The duration of U.S. interest rate hikes can be longer, all for the Federal Reserve to control the U.S. inflation rate at the target of 2%.
The second major factor lies in the Bank of Japan's "Pearl Harbor surprise attack."
The rise in U.S. Treasury bond yields implies that U.S. Treasury bonds are shunned, and the reason for the lack of buyers for U.S. debt is still due to issues on the side of Japan, the largest creditor of the United States.
As we mentioned earlier, due to long-term deflation, Japan has adopted an "unlimited quantitative easing" economic stimulus policy. The intensity of the Bank of Japan's money printing is much greater than that of the United States.
The Bank of Japan's money printing is much more aggressive than that of the United States.
However, in the past two years, against the backdrop of global inflation caused by the United States' excessive money printing, Japan's domestic CPI has been rising continuously for more than a dozen months, exceeding the warning level. Japan, which was originally in deflation, suddenly began to experience inflation, so Japan's original loose stimulus policy also began to show signs of loosening.
At the end of July, the Bank of Japan announced an adjustment to the yield curve, relaxing the long-term interest rate level, which was originally maintained at plus or minus 0.5%, to 1%. This means that the long-term interest rate in Japan has effectively increased by 0.5%.
As a country that invests globally and is also the largest creditor of the United States, Japan has a lot of international investment capabilities and overseas assets. Now that the policy has raised the domestic asset yield, this means that more yen capital will flow back from the United States to Japan, leading to a lack of interest in U.S. Treasury bonds.
Japan is generally selling U.S. Treasury bonds.
Looking at the largest buyers of Treasury bonds, China and Japan are actually the main forces in purchasing U.S. Treasury bonds. Other countries, on the one hand, do not have a reason to buy, and on the other hand, do not have such a large economic system and strength to support the purchase of U.S. Treasury bonds.So, when China continues to sell off U.S. debt and Japan reduces its purchases of U.S. Treasury bonds, the U.S. Treasury bonds, known as the "anchor of global asset pricing," will become unattractive.
The credit of U.S. Treasury bonds is overdrawn, and fewer people are buying them.
In addition to the Bank of Japan reducing its purchases of U.S. debt, the international rating agency Fitch also announced a downgrade of the United States' long-term foreign currency issuer default rating, from the highest AAA rating to AA+. Despite the protests of U.S. Treasury Secretary Yellen and threats from the U.S. government, Fitch ultimately made this "decision against the ancestors."
We all know that the three major rating agencies have a very good relationship with the United States. The decision is actually supported by the fact that the outlook for U.S. Treasury bonds is so bad that Fitch itself can't stand it, and customers will question its professional ability.
The U.S. credit rating is downgraded.
The total amount of U.S. Treasury bonds as a percentage of GDP has reached as high as 120%, with a total amount of 32.6 trillion yuan, and debt will soar in subsequent fiscal years.
And it just so happens that the United States is currently at the peak of its interest rate hike cycle, with the cost of dollars in the market as high as 6-7%. At this time, if the United States continues to issue Treasury bonds, according to a 4% interest rate, it will also bear several times or even dozens of times more borrowing interest than before.
And can the future U.S. government solve this problem and stubborn disease? I think it is unlikely.
Because the reason why this huge economic entity of the United States can achieve unexpected economic development is by using the special status of the U.S. dollar as the world's reserve currency to overprint dollars.
These overprinted dollars are actually the fuel for accelerating the U.S. economy. The United States can only ensure its economic development by continuously burning dollars, and the U.S. government also needs these dollars to maintain the huge military expenditure on military hegemony.The United States leads the world in military spending.
Therefore, no matter who becomes the president afterwards, unless the subsequent president only wants to serve for 4 years and is willing to bear the blame for an economic recession during their term in order to resolve the U.S. debt crisis, it would be very difficult to achieve this.
Thus, with the continuous expansion of the U.S. national debt, the rising interest payments, the severe losses from investing in U.S. debt, and the decreasing number of buyers for U.S. debt, although the U.S. has briefly experienced the so-called "economic soft landing," the future looks very bleak.
This is the consequence of the United States' malicious misuse of dollar hegemony, indiscriminate issuance of U.S. Treasury bonds, and continuous borrowing beyond market expectations.
The more U.S. debt is issued, the fewer countries will buy it.
According to the latest U.S. debt issuance plan, the U.S. Treasury Department will issue about $103 billion in U.S. Treasury bonds. This amount exceeds market expectations and is higher than the $96 billion in Treasury bonds issued in the first quarter. Combining this with previous issuance data, the issuance volume of U.S. Treasury bonds is increasing.
However, upon closer examination, there are fewer and fewer buyers of U.S. debt. This is because there is a subscription multiple for the issuance of U.S. Treasury bonds. Previously, this multiple was around 5, meaning that the subscribed amount exceeded the issuance amount by 5 times.
But now this multiple has dropped to around 3. If it continues to decrease, there will be an embarrassing situation where the U.S. issues Treasury bonds but no one buys them.
And when this day comes, we can declare the beginning of the collapse of dollar hegemony, because no matter how much the U.S. Treasury bonds are hyped, if no one buys them after issuance, it means the world does not recognize the dollar, does not recognize U.S. debt, and it is also the beginning of "global de-dollarization."