Major U.S. Debt Holders Begin Major Selloff

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By Jacob Maslow

China’s slowdown has caused the country to rid itself of U.S. debt. Several countries that devoured U.S. Treasury bonds, including China, Brazil and Russia, have begun unloading their holdings to increase government revenue.

The selloff marks the largest decline in demand for U.S. bonds and notes since tracking began in 1978.

Deutsche Bank (DBKGn) states that central banks sold more than $123 billion treasury debt in a 12-month period ending in July. Purchasing of debt peaked in the year ending in January 2013 with purchases hitting $230 billion.

Major holders of debt have been unloading bonds, but Wall Street assures that there is still high demand for U.S. debt as a safe investment. Wall Street suggests that demand from U.S. and foreign companies has offset much of the debt selloff taking place.

Bond yields will likely remain unchanged as central banks are finding new buyers of debt.

Stronger growth and inflation would allow U.S. bond yields to grow according to Michael Pettis, a finance professor in Beijing. The benchmark for a 10-year U.S. treasury bill is 2% down from 3 percent in 2013. Bond yields reached 4% – 5% when the economy took a downturn in 2009.

China is continuing to sell dollars and buy yen to steady the yen’s target rate.

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