Tags: americans | US | Investors | buyers | Treasuries

Report: US Investors Regain Majority Holding of Treasuries

Monday, 09 Aug 2010 02:21 PM

U.S. investors reportedly own more Treasuries than foreign holders for the first time since the start of the financial crisis in August 2007.

Mutual funds, households and banks have boosted the domestic share of the $8.18 trillion in tradable U.S. debt to 50.2 percent as of May, according to the most recent Treasury Department data, Bloomberg reported.

Demand for Treasuries from U.S. investors is climbing as consumer spending and incomes stagnate and the savings rate reaches the highest level in almost 18 years, hitting 6.4 percent in June.

“Americans are consuming less and saving more,” Jeffrey Caughron, the chief market analyst in Oklahoma City at Baker Group, which advises community banks on investing assets totaling $23 billion, told Bloomberg. “That causes an increase in savings and deposits, which end up being invested in government securities.”

Meanwhile, the Treasury Department has said it wants to move buyers of U.S. debt into longer-dated securities but uncomfortably strong demand for very short-term paper could make that task more difficult.

Recent changes to rules governing money-market funds have forced more investors into short-dated Treasuries, such as two-month and three-month bills. Rates are so low in the very front end that the Treasury may have to increase its bill issuance.

"That's been the discussion of a lot of dealer meetings," one primary dealer who did not wish to be named told Reuters. "I think that there could be more bill issuance. But it's all kind of a net sum game. If they increase bill issuance they're going to have to decrease coupon issuance."

The Treasury's task is to subdue any wild moves in yields and make sure the U.S. government's cost of borrowing stays within reasonable limits over time. The best way to do that is to lock in more low rates on long-term securities, such as the 30-year bond.

That mission has grown ever more crucial as the U.S. deficit has expanded in recent years.

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U.S. investors reportedly own more Treasuries than foreign holders for the first time since the start of the financial crisis in August 2007. Mutual funds, households and banks have boosted the domestic share of the $8.18 trillion in tradable U.S. debt to 50.2 percent as...
americans,US,Investors,buyers, Treasuries
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2010-21-09
Monday, 09 Aug 2010 02:21 PM
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