Foreign investors help prop up Treasury market as Fed considers retreat

Financial Times/Kate Duguid and Joe Rennison

Repost from 9-23-2021

photo of Fed chair Powell at podium answering questions“Foreign investors cannot get enough US government debt, which analysts say could help soften the blow when the Federal Reserve starts to cut back its own bond-buying programme this year.”

USAGOLD note: Though the Financial Times characterizes the foreign purchases as “a high level of demand,” they do not appear to be enough to offset in any meaningful way the large contribution made by the Fed each month. The Wall Street Journal recently reported that the Fed purchased nearly 75% of the federal debt issued since the pandemic began. Though the financial press might make considerable noise about tapering, the Fed will need to consider what happens to rates if its support is removed – even if done gradually.

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