US, China & Russia May Hold Talks on Restructuring US’s Massive Debt Under Trump
- US, China & Russia May Hold Talks on Restructuring US’s Massive Debt Under Trump
Russia, China and other emerging market economies have intensified the sale of holdings in US government bonds. Russian financial experts suggest that if the selloff continues, and President-elect Trump moves forward on his spending promises, Washington, Beijing and Moscow may end up holding talks with creditors on restructuring US debt.
The latest figures made available by the US Treasury Department on foreign holdings of US government debt show that even as total investment into US treasury bills has grown, the stakes of China and Russia have dropped off significantly, from $1,258 billion to $1,157 and $89.1 to $76.5 billion, respectively. The drop, consisting nearly $100 billion (or 9.1%) of China’s total holdings, and $12.6 billion, (or 14%) of Russia’s, saw Russia drop one spot from the 18th to the 17th largest holder of US debt. China remains the number one foreign stakeholder, but pulled out over $28 billion just between August and September.
Financial experts have long held that US Treasuries are a highly dependable investment, one which has never faced the prospect of defaulting, making them a good purchase during times of market volatility.
Speaking to Russia’s Expert magazine, Broker Credit Service Ultima director Vitaly Bagamanov explained that there are no indications at the moment that Washington is not in a condition to pay on its obligations, particularly given the fact that the US itself is the issuer of the dollars used for settlements.
Alternatives, Bagamanov noted, include European bonds, but that market is limited, making the US debt market the most attractive even for those countries with strained relations with Washington.
At the same time, President-elect Donald Trump’s promises to invest in US infrastructure and to stimulate job creation may spur inflation, forcing the Federal Reserve to raise interest rates. This, according to Bagamanov, could lead to a new influx of foreign investment in the US debt market in search of a better yield, and to an outflow of funds from emerging markets.
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