Has QE4 already started?
For the first time since October 2014, the Federal Reserve has bought a significant number of US Treasurys. Over the past two weeks, the Fed purchased $14 billion in US bonds.
The yield on the 10-year Treasury fell below the yield on the 2-year for the first time in 12 years, stoking recession fears and tanking stock markets.
Yield curve inversions have preceded all nine recessions since 1955. This was the first time the 10-year Treasury yield has dropped below the 2-year yield since June 2007 – the cusp of the Great Recession.
China dumped more US Treasurys in May, pushing their holdings to the lowest level in two years, according to data released this week by the US Treasury Department.
The Chinese divested themselves of US debt for the third straight month, selling off another $2.8 billion in Treasurys in May. The month before, China dumped $7.5 billion in US bonds and that followed on the heels of the biggest US Treasury selloff by the Chinese in nearly 2 1/2 years in March. Over the last three months alone, the Chinese have shed $20.3 billion in US debt.
China dumped more US Treasurys in April, selling off another $7.5 billion in US debt, according to the latest US Treasury Department data. This follows on the heels of the biggest US Treasury selloff by the Chinese in nearly 2 1/2 years in March.
Over the last two months alone, the Chinese have dumped some $17.5 billion in US debt.
China sold off the highest level of US Treasurys in nearly 2-1/2 years in March. Meanwhile, there are renewed fears the Chinese could implement its “nuclear options” and sell off even more US debt in retaliation for US trade war tariffs.
China sold $10.45 billion in Treasuries in March. That was the biggest US debt dump by China since October 2016.
Month after month, the Trump administration runs multi-billion dollar deficits. The national debt has ballooned to over $22 trillion. According to the most recent Treasury Report, the US has a net worth of negative $21.5 trillion. And this understates the problem.
As Wolf Richter of WolfStreet puts it, the US government has “debt out the wazoo.”
Is this sustainable?
Over the past 12 months, the US federal government has added $1.5 trillion to the national debt.
As of Jan 30, the debt stood just under the $22 trillion mark at $21.97 trillion, according to the latest Treasury Department data. As WolfStreet put it, we’re seeing these rapidly increasing levels of debt during “good times when the economy is hopping. At the next recession, this is going to get cute.”
But even as the US added to its debt load, foreign holders of US Treasurys are gradually selling them off. So, who’s buying up all of this debt? And is it sustainable?
