The composition of U.S. treasury bonds buyers have changed. This is particularly important in the context of a big fiscal deficit such as the current one. For years, foreign investors, banks and pensions where natural consumers of Treausries. The petrodollar phenomenon, crafted by Henry Kissinger, secured U.S. funding for decades. Until the #gfc, the Fed and US households were marginal buyers. But #qe changed the dynamic, which was accentuated during the pandemic, where the Fed bought more than half of outstanding treasury debt, and foreign investors started to become marginal. Currently, households are the main buyer, since the fall of #svb, but they invest overwhelmingly in short term treasury bills, because banks have not been able to raise their deposit rates. As the Treasury pivots into issuing long term debt to finance the deficit, is not clear at all who will be the buyer of last resort, and that can put a lot of up pressure on yields, which in turn will increase the deficit, simply to service the debt. China, for years one of the main foreign investors, is dumping treasuries to buy gold, the Saudis seem to be shifting towards China and Russia, and Japan is concentrated on their own treasury curve. Not a good spot to be.
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Chart source: GS GIS
