Who is buying all the Treasuries?
With $28 Trillion in treasuries outstanding, only $5.4 Trillion is held by the Fed (this assumes my quick Google search, which brought me to the St Louis Fed page, was right).
A YouTuber I follow says the Fed has a secret balance sheet. (I lean heavily towards this belief myself.)
I did a Google search for how much money is being managed by pensions. The top of the search brought up an OECD report. It indicated worldwide pension assets are $35 Trillion and of that, $20 Trillion was in the US. So I think I get it, a pension manager has a commitment to pay dollars, with no regard for what those dollars will buy. So perhaps pension managers would be willing to hold Treasuries with a yield that is practically guaranteed to lose purchasing power at maturity. Or perhaps they are required to have a percentage of assets in US treasuries. Either way, it’s the pension recipient who has to worry about his pension dollars not having purchasing power. I don’t know if that $20 Trillion figure was all US pensions, which is what I’m thinking, or if it was only non-government pensions.
I know that when I was working in corporate America, around 2000, all the giant corporations started ending their pension programs. Workers were no longer working toward a pension.
I also know that many (if not most) pensions, are underfunded. Which would force pension managers into risk on assets, as opposed to US Treasuries.
I understand foreign governments also own US Treasuries. A recent podcast I listened to indicated that Japan owns $1 Trillion in US Treasuries.
Regardless, when these Treasuries held by foreign governments have Treasuries come to maturity, why on earth would they want to roll them over when CPLie is 5.3% and the 30 year is at 2%?
Outside of foreign governments and pensions, who is buying all these treasuries, besides the Fed? I know Russia recently dumped all their US Treasuries. New funds coming into pensions, I would guess, is earmarked for risk on assets, since most are underfunded. And, again, why would a foreign government roll over for a guaranteed loss of purchasing power?
WHO IS BUYING ALL THESE US TREASURIES????
Great question. Broadly speaking Treasuries come in two forms - marketable debt and non-marketable debt. Marketable debt is what we think of as the Treasury market, whereas non-marketable debt are mostly Treasuries issued to other parts of the government (basically and accounting trick). Most recent data shows there are 22t in marketable Treasuries and 6t in non-marketable Treasuries.
Fed data breaks down the ownership as follows:
Asset managers (4.3t) - mutual funds (1.3t) money market funds (2t) private pension/insurers (1t)
households (including hedge funds) (1.3t)
Banks and Government sponsored enterprises 1.5t
and the rest by non-financial corporations, securities dealers, ETFs etc.
Note that foreigners don't but Treasuries because they are good investments, but because they want to hold dollars (perhaps for FX intervention, or to support the dollar needs of their businesses). If you have billions of dollars you don't deposit that in a bank (credit risk), you buy Treasuries which are credit risk free. In a sense, Treasuries are just dollars that pay interest.
Ok, so maybe that explains it. When I look at a large corporation’s balance sheet, and I see tens of billions in cash & cash equivalents, they don’t have the majority of that in cash at the bank. The majority is in US Treasuries.
I’ve always wondered how the large corporations bank. Their bank is essentially the US Treasury.
With Bullard’s admission yesterday that inflation may stay well above the 2% target for some time, I would guess we might be seeing more companies (like Palantir) move some of their cash and cash equivalents into gold. As these treasuries are sold for cash to buy gold, it only puts more and more pressure on the Fed to be the buyer of last resort.
I’m with Gregory Mannarino and Peter Schiff: the Fed won’t taper. If they do, they’ll have to reverse course soon after.