Uncle Sam Wants You: Treasury Depends More on Domestic Bond Buyers

The U.S. government has been issuing more debt, but it’s not getting more foreign buyers in the door. As a result, U.S. investors have so far financed all of this year’s increase in the federal government’s borrowing.

Foreign holdings of the debt have remained essentially flat, though the government’s borrowing has risen by $500 billion, giving foreign investors the smallest share of U.S. government debt since 2003. Even as yields on Treasury securities have risen to multiyear highs, foreign demand for debt at government bond auctions has slowed to the weakest level since 2008. Yields rise when bond prices fall.

So the Wall Street Journey sees this as a negative that there's less foreign investment in government debt now that Trump is in office but I see this as more of a good thing. I personally think the US or any government shouldn't be selling their debt to another country. Preferable I'd like to see countries running a balanced budget and not allowed to issue debt but we all know that's not going to happen anytime soon. So if anything I think countries should only be allowed to issue debt to their own citizens to buy. If the country has a solid economy and the government is not recklessly growing then citizens will have no problem buying that debt and if the country is turning into a "socialist paradise" the people won't buy the government's debt and the free market will force them to change their policies.

While the tax cuts are stimulative, shifts in Federal Reserve policy and foreign purchases have led U.S. investors to purchase roughly $300 billion more Treasurys than would have been the case had Fed policy remained unchanged and foreign investors added to their holdings at their previous pace.

I'm assuming they are talking about Trump's strong dollar policy, his spending plans and the increase in interest rates that have scared foreign investors away. But again I see this as a good thing that they don't want to buy our debt.

A bigger concern perhaps is that by boosting debt to fuel growth at a time when the unemployment rate is about 4%, the U.S. may be “opening the door to much more serious risks,” Mr. Slok said.

Those risks for the economy, which grew at a 4.1% pace in the second quarter, include the possibility that it overheats. That could force the Fed to raise interest rates quickly, risking a rise in bond yields, and accelerate the next recession, Mr. Slok said.

Ha, an over heating economy is bad? Didn't look so bad for China when they were growing around 10% a year. No one was complaining about them growing so fast in fact that was one of the main reasons why people were investing in China because of the huge growth. Now Trump wants to replicate that and the media says it's a bad thing.

The fact that US investors are buying the debt could mean that the US economy is turning around and getting stronger while the rest of the world is drowning in to much government regulations. Granted the US has a long ways to go before we're not drowning in our own regulations but at least Trump is getting our heads above water.

Source: https://www.wsj.com/articles/funding-secured-for-the-u-s-government-that-means-domestic-bond-buyers-1534507201