CENTRAL BANKS QUIT THE DOLLAR
Foreign central banks held 50.2% of America's foreign-owned debt in 2023. In June, 40.6%. The traders who replaced them reprice every morning, and the 30-year just hit its highest since 2007.
America's debt reached $39.99 trillion on Monday, thirteen billion short of $40 trillion, and its lenders just raised the price.
Someone still lends America money every month. It just isn't the same someone.
The old lenders were foreign central banks — Japan's, China's, the institutions that park a country's savings somewhere safe and leave it there for thirty years without haggling over the price. They bought American government bonds because their governments wanted dollars on hand, not because the return was good. In January 2023 they held 50.2% of all American government debt owned abroad. A year ago, 42.8%. In June, 40.6%. Their holdings fell $114bn in twelve months.
The money didn't leave. It changed hands.
Foreigners as a whole bought more, not less: total holdings rose $205bn over the year, to $9.3 trillion, according to the Treasury's monthly record of who abroad owns American debt, published Monday. Hedge funds, insurers, pension funds and asset managers took the room the central banks left. They will lend Washington whatever it wants. They price it again every morning.
