By worldwide requirements, the proportion of U.S. Treasury debt held by international traders stays excessive, about 30% as of Q2 2023, largely because of the U.S.’s standing as safe-haven.
That degree has remained comparatively sturdy just lately, whilst the quantity held by China and Japan have been dropping, as identified by Wells Fargo Invstment Institute strategist analyst Jennifer Timmerman and international strategist Gary Schlossberg.
But that is not all the time the case. “Overseas investment in U.S. debt has been more volatile than domestic holdings when demand for the dollar and Treasuries is dampened by weak fiscal policy and poor economic performance, in part due to more attractive, global alternatives,” they wrote in a latest be aware.
“In the current cycle, the Federal Reserve’s credit tightening and perceived safe-haven demand during the global economic slowdown have so far supported the foreigh financing of the budget deficit.”
But traders should not rely on that holding up, particularly as soon as the Fed begins to chop rates of interest.
Source: U.S. Treasury
“We expect dollar demand to weaken temporarily in response to falling U.S. interest rates and stronger global risk appetite as investors favor other currencies and the world economy recovers later in 2024, perhaps aggravated by reduced demand for U.S. debt,” they stated.
Relevant tickers embrace: Invesco DB US Dollar Index Bearish ETF (NYSEARCA:UDN), ProShares UltraShort 20+ Year Treasury ETF (NYSEARCA:TBT), Direxion Daily 20+ Year Treasury Bear 3X ETF (NYSEARCA:TMV).