Tciso wrote: ↑Mon Apr 14, 2025 1:35 pm
Per wrote: ↑Mon Apr 14, 2025 7:11 am
Megaterio Llamas wrote: ↑Fri Apr 11, 2025 4:45 pm
I just heard today that it was Japan's selling off of US treasury bonds that prompted Trump's about-face on the worldwide tariffs. They seem to be the largest holder of US bonds.
Japan also met with South Korea and China last week to discuss business.
Yes, if you look country by country, on Dec 31st Japan held the most at just over a trillion USD. Then China at 759 billion, the UK at 729 billion, Luxembourg at 424 billion, the Cayman Islands at 419 billion and Canada in sixth place with 379 billion.
But if the EU acts as one entity, they are the greatest debt holder.
Just the top five (Luxembourg 424 + Belgium 359 + Ireland 336 + France 332 + Germany 97 billion) hold a combined USD 1.548 trillion in US debt.
When it comes to trade negotiations the EU commission speaks for all member states, so if they want to use the debt card, it's quite significant.
If they then look arms with the UK, Switzerland and Norway, that adds another 1.170 trillion, so a total of just over 2.7 trillion, plus all the debt owned by the other 22 member states.
A lot of this bond talk has ben massively over-simplified. It has also completey ignored the fact that the same countries that hold US debt also owe the US a portion of their debt.
This guy has only looked at 1 side of the issue.
The one side of the issue is pretty significant...
Just think of mortgages...Banks match funds to price fixed rate loans so in simple terms they have a cost of funds which is the rate they have to pay to get the $$ to lend, then they add a spread to cover their costs plus a profit to determine the customers fixed interest rate...
When there is a significant sell off of the bonds which is the money the Government uses to pay its bills, in order to replace the bonds that were sold they have to offer higher interest rates to attract new buyers...
Which means the cost of fixed rate interest loans also goes up...
And maybe more troubling is that in a climate where there is a major sell off when does a new buyer decide to buy? If the return is higher tomorrow investors will hold off until they think the crisis if over and the bond rates start to come down...
It reminds me of back in the 80's when mortgage rates were as high as 18 - 20% and Canada Savings Bonds were paying out 13%...
Prime was climbing on an almost daily basis and smaller institutions like Credit Unions stopped offering fixed rate mortgages because the dollars their customers invested was short term which meant that they couldn't match funds so instead they only offered floating rates which moved everytime the Prime interest rate moved...
From the Financial Post....
U.S. Treasuries are the global lending market benchmark, used by banks around the world to price other instruments, so unusual activity in that bond market can have ripple effects on a host of other markets. With bond yields used to price everything from mortgages to complex derivatives, risk was rising that a broader financial crisis could develop and trigger defaults by financial institutions.
