In June, Russia has maintained the volume of investments in government bonds of US $14.9 billion this is stated in a Wednesday press release from the U.S. Treasury (U.S. Treasury). Thus, the country is still not among the 30 largest holders of such bonds. From this list, Russia was eliminated by the end of may.
What are U.S. treasuries?
Securities issued by the U.S. Treasury Department. They are owned by foreign legal and natural persons, companies, funds and private investors.
Why sell them?
Bonds U.S. Treasury are used to Finance government debt. The trade allows the us government to obtain additional funds to Finance government spending in a big budget deficit — $76.9 billion in July 2018.
And investors thus provide a safety reserve of cash and dollar form a “safety cushion”. The us equities are relatively low. But since the U.S. remains one of the largest economies in the world, it allows you to count on money back guarantee under any circumstances.
A lot of whether Russia sold the bonds?
At the beginning of 2018, the volume of Russian investments fell below $100 billion — to $96,9 billion In April, the investment was reduced to $48.7 billion, and in may to the current $14.9 billion.
Thus, for half a year Russia got rid of us securities worth more than $80 billion.
Although later the experts of the Council on foreign relations, said that Russia “hid” part of the offshore companies in Belgium and the Cayman Islands. Purchases of US government debt is that if the investor acquires securities, for example, through the Belgian Depository Bank, then this amount will be recorded on the balance sheet is Belgium.
In this track, how much was sold to the Central Bank, it is difficult, as the us Ministry of Finance reflect the statistics for all residents. And one of them may enter and commercial banks, and private investors.
But what the country most invest in US debt?
The top five major holders of US treasuries in June is traditionally opened by Asian countries: China with investments of $1.18 trillion Japan — $1.03 trillion. In third place is Brazil, which has invested in American securities $300,1 billion Completing the list Ireland and the UK with $299,6 billion and $273,9 billion, respectively.
On the 30th place in the list of top countries by volume of investments in the national debt of the United States is the Philippines with an investment of $31,6 billion.
Why Russia is “dumping” so many of US securities?
In June, answering a question of deputies of the state Duma, the head of the Central Bank Elvira Nabiullina explained that the Russian authorities carried out a redistribution of international reserves.
Later analysts have linked these steps with the increase in geopolitical tensions amid the tightening sanctions on Russia. In April, the U.S. has extended the restrictive measures against Russia. Then under their influence were 38 legal entities and individuals. And the news about the sanctions traditionally have caused notable fluctuations in foreign exchange and stock markets.
Thus, the Russian authorities simply want to protect assets from a possible freeze by the us authorities. Of course, such freezing remains an extreme measure, and threatens significant reputational blow to the US, but they’ve done it before — for example, with Iran.
Now is not yet known, data on investments in Treasury securities in July. And still not over August, when the sanctions debate has received a new round. So, perhaps, future reports of the U.S. Treasury will show an even greater reduction of Russian investments.
In addition, the sale of us securities occurred against the background of tightening monetary policy and rising yields of US government debt. So, in 2018, the Federal reserve twice raised the base rate is 1.5–1.75 percent in March and in June to 1.75–2%, at the August meeting, the rate was kept at the current level. The yield on ten-year U.S. Treasury bonds is around 2.88% and in July it exceeded 3%.
And other countries sell bonds?
After Russia from the American securities began to decline, and Turkey. In June, the country reduced the share of us national debt to $28.8 billion For last month, a serious disagreement between Ankara and Washington mutual led to the introduction of fees and a dramatic drop in the Turkish Lira. Which again could lead to further selling of US treasuries by Turkey.
Reduced investments and the main holders of bonds. Thus, China has reduced its share on $4.4 billion to $1.18 trillion, and Japan — up to $1.03 trillion.
Experts say the global trend for the decline in investments in US treasuries.
The total volume of investments of foreign countries in American securities in June remained almost unchanged — $6,211 trillion, compared with $6,213 trillion in may. According to him, statistics was supported by countries which, on the contrary, increased their stakes, UK, Luxembourg, Singapore and others.
There are alternatives American securities?
On the one hand, Russia is steadily expanding its share of the gold in the structure of international reserves from $60.2 billion in early 2017 to $78 billion in may 2018.
On the other, according to experts, an alternative could be the government bonds of other developed countries in the Euro and the yen.