From CharlesBiderman

The Heart of the Ponzi?!?

Oct  07
By Chris Hamilton

Given the Fed will complete it’s “taper” shortly…the topic of who has bought, who owns, and who will buy US Treasury debt seems important.



The 1st slide shows the four classes of US Treasury buyers.  It shows who purchased what since ’00 cross referencing the blended interest rates on the Treasury curve.  As yields have collapsed and the alternative markets (stocks, RE, corporate or junk bonds) have improved or offered more attractive returns…only the Fed and Foreigners have continued to accumulate Treasury’s.  I included the Fed’s $667 Billion in Operation Twist long bond purchases (paid for from selling all their short paper) to show the power and magnitude of the Fed’s purchases since 2011…



OK, let’s follow CBO assumptions that debt creation will continue at present levels or slightly higher til say, infinity.  Who will buy the new and rollover debt?  Since the yields are too low for most Public pensions or insurers or institutional buyers and without a major market downturn; they are not likely to step forward.  The Intra-Gov purchases will be limited by slowing or negative Social Security surplus’ so no buyer there.  And the Fed’s taper is nearly complete and the Fed will be looking to “normalize” their balance sheet by directly selling or slowing rolling off their holdings.  This leaves only ”Foreigners” to maintain the Treasury bid for the vast majority of new issuance plus Fed’s “normalization”.  But which “Foreigners” have been buying since ’11?

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