American debt is not fragrant! According to recent media reports, the Federal Reserve, the Federal Reserve, central banks, sovereign funds and global commercial and financial institutions are withdrawing from the US bond market with a scale of US$ 23.7 trillion. This kind of scene can be said to be rare in the past, so why is the US debt not fragrant recently?

First, selling American debt is to stabilize the domestic exchange rate. Since the beginning of this year, US debt has been continuously sold, and central banks in many countries have joined the tide of selling US debt. The first reason is to stabilize the domestic exchange rate. According to media reports, since the Federal Reserve began to raise interest rates in March, Japan has continuously sold up to 230 billion US dollars of US debt, setting a record for the longest continuous selling since 2005. According to IMF data, the foreign exchange reserves of central banks in emerging markets have decreased by 300 billion US dollars this year, and the total foreign exchange reserves of central banks around the world have decreased by about 1 trillion US dollars. In August and September alone, Japan and South Korea reduced their foreign exchange reserves by more than $654.38 trillion.

So, why do so many central banks sell US debt? The main reason is to stabilize the exchange rate of the domestic currency. After the United States raised interest rates and reduced its scale, the US dollar index began to skyrocket, causing many currencies to fall into a state of sharp depreciation. In order to stabilize the exchange rate and maintain financial stability, central banks in various countries do not cut leeks for the United States, but need to sell American debt and quickly exchange it for dollars to sell dollars in the foreign exchange market, thus maintaining the stability of their own currencies. Therefore, selling American debt is a measure that many central banks hope to keep the exchange rate of their currencies stable.

Second, the scale of US debt is too large, which has caused investors to worry. At present, the scale of US debt has exceeded 3 1 trillion US dollars, which is roughly equivalent to 134.8% of US GDP of 23 trillion US dollars in 2026. The annual interest alone may be as high as $670 billion. With so much American debt and interest, what will the United States pay back in the future? This may be something that many investors are very worried about.

The total population of the United States is 330 million, but the national debt is 3 1 trillion dollars, and the average national debt in the United States has reached 9.39 trillion dollars. In 20021year, the US fiscal revenue was about 4.05 trillion US dollars, and the fiscal expenditure was about 6.82 trillion US dollars, which means that the US fiscal deficit reached 2.77 trillion US dollars in 20021year. In 2022, it is estimated that the US fiscal deficit may remain at around 1 trillion US dollars.

In fact, the United States has become accustomed to spending money lavishly. The cost of a 14 square meter public toilet has reached $65,438+700,000. From this point of view, it may be difficult for the United States to have a fiscal surplus in the future. Obviously, it is very difficult to repay this $3 1 trillion in the future. Therefore, the US debt has reached 3 1 trillion dollars, which may be difficult to repay in the future, which has caused some concerns of investors.

3. the price of us debt has fallen. at present, us debt has ushered in a wave of selling. The second reason is that under the influence of the US interest rate hike, the price of US debt is falling sharply. Generally speaking, American debt has a fixed interest rate. In this way, if the Fed raises interest rates, the transaction price of US debt will fall, so the yield of US debt will be almost the same as that after raising interest rates. For example, the original transaction price of American debt is 100 yuan, and the interest rate is 2%, making 2 yuan money every year. However, if the interest rate is raised to 2.5%, the price of US debt will probably drop to more than 90 yuan. Obviously, raising interest rates will have a considerable impact on bond prices. Under the influence of the Federal Reserve's possible interest rate hike in the future, the transaction price of US debt may drop sharply in the future. Many central banks and investment institutions are unwilling to bear more book losses, and they will also sell a lot of US debt to avoid greater losses.

For example, on June 10, 65438+ 10/1,10-year US Treasury yields rose 10 basis points to 3.99%, approaching 4% again. Bank of America analysts pointed out that by the first quarter of 2023, the US federal benchmark interest rate and the yield of US bonds may rise to the range of 4.3%-5%, which indicates that the price of US bonds will fall in the future and may continue to be sold sharply by investment institutions. Bloomberg's total return index of US Treasury bonds has lost 13% this year, almost four times that of 2009, which is the worst annual performance of the index since 1973. Therefore, with the Fed raising interest rates, the price of US debt has also declined, which may be the second reason for many central banks and other institutions to sell US debt.

Three. Conclusion To sum up, there are three main reasons for the selling tide of US debt. The first reason is to stabilize the exchange rate. The second reason is that the size of US debt is too large, which has caused investors to worry. The third reason is that the Federal Reserve's interest rate hike triggered a continuous decline in the price of US debt, which triggered investors to sell.