X

Sign Up To Our Free Newsletter

Join Now

Thanks for subscribing to our free newsletter!

ERROR

  • 4 minutes IMPORTANT ARTICLE BY OILPRICE.COM EDITOR - "Naked Short Selling: The Truth Is Much Worse Than You Have Been Told"
  • 5 minutes “Cushing Oil Inventories Are Soaring Again” By Tsvetana Paraskova
  • 7 minutes United States LNG Exports Reach Third Place
  • 1 hour Texas forced to have rolling black outs. Not from downed power line , but because the wind energy turbines are frozen.
  • 1 day Wednesday Nikki Haley reached out to Trump for meeting at Mar-a-lago. Trump said No ! You blew it Nikki . . .
  • 1 day NYT:  The Supreme Court’s order (Re:  Trump’s tax returns) set in motion a series of events that could lead to the startling possibility of a criminal trial of a former U.S. president
  • 15 mins Retired RAF pilot wins legal challenge over a wind farm
  • 11 hours Speaker Pelosi, "Tear Down This Wall"
  • 11 hours Disaster looming in UK offshore wind power
  • 11 hours The World Economic Forum & Davos - Setting the agenda on fossil fuels, global regulations, etc.
  • 8 hours Minerals, Mining and Industrial Ecology
  • 3 hours U.S. Presidential Elections Status - Electoral Votes
  • 10 hours Chance for (Saudi)Arabian peninsula having giant onshore Gas too?
  • 10 hours The latest GOP nonsense on Texas shows us the future Republicans want
  • 13 hours Pipeline vs Train vs Ship to Transport Crude Oil.
Global Economy Throwing Up Red Flags For Oil

Global Economy Throwing Up Red Flags For Oil

Investors are feeling increasingly gloomy…

Trade War Weighs On Western Automakers In China

Trade War Weighs On Western Automakers In China

Western automakers in China are…

Dave Forest

Dave Forest

Dave is Managing Geologist of the Pierce Points Daily E-Letter.

More Info

Premium Content

The Bond Check-In

Lots of concern the last few weeks over sovereign debt.

Investors globally were wondering how Greece would fund its budget shortfalls. Now we're looking at how Europe is going to come up with the money for its proposed $1 trillion bailout announced this week.

To get some idea, take a look at how America is doing funding its stimulus-induced deficit.

Yesterday, the U.S. government released its Monthly Treasury Statement. Giving us the most up-to-date view of America's budget and financing situation.

So far in fiscal 2010 (which began in October 2009), America has run a deficit of $800 billion. Almost exactly the same as the U.S. racked up from October to April of the last fiscal year.

The critical question: how is America doing financing this shortfall?

Pretty well, actually. So far in FY2010, Americans have purchased $882 billion in Treasury bonds. Government agencies have bought a further $156 billion. And foreign buyers have picked up $336 billion.

Purchases of US Treasuries

All told, these investors have leant the U.S. government $1.375 trillion to finance the nation's supercharged deficit spending. In fact, domestic bond purchases alone have been enough to finance this year's $800 billion shortfall. (For anyone wondering, purchases of Treasuries by the Federal Reserve made up just a very small portion of this buying. About $10 billion.)

This is an interesting development. Americans are stepping up and buying Treasuries like never before. As the chart below shows, up until 2007 America relied largely on foreign bond buyers, who consistently accounted for between 40 and 50% of total Treasuries purchased.

US Bond Sales - Foreign Buyers

That's changed since the onset of the financial crisis. In fiscal 2009, foreigners accounted for just 10% of the $2.1 trillion in total bond purchases. So far in FY2010 foreign buying has been a little stronger, but these buyers still only account for 25%. Well below the average for the past decade.

Of course, there are still a number of issues facing the U.S. government. Debt service payments are rising. Through the first seven months of fiscal 2010, America paid $224 billion in interest on its debt. Up from $193 billion for the same period in FY2009.

The bigger challenge is that all of these bonds will need to be redeemed at some point. Which means America either needs to "roll" the debt by selling more Treasuries, or start running surpluses. The latter looks unlikely for the next several years.

But for the moment, bond buyers appear content to continue lending money to the world's largest economy. Something to consider for anyone betting against America and the dollar.

By. Dave Forest of Notela Resources


Download The Free Oilprice App Today

Back to homepage





Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News