The U.S. government and media often make demands of China to increase holdings of U.S. Treasury bonds, at the very least not to sell them.

As a result, in the public's perception, China is one of the countries that sells the most U.S. Treasury bonds.

However, in reality, the most frantic seller of U.S. Treasury bonds is not China, not the UK which sold $30 billion in April, not Japan which currently holds the most overseas U.S. Treasury bonds, nor Russia which is close to completely selling off its U.S. Treasury bonds.

Only by understanding the operations of the Federal Reserve and the U.S. Treasury can we gain a deeper understanding of the future risks of U.S. Treasury bonds.

The U.S. Treasury Department releases a TIC (Treasury International Capital) report in the middle of each month, but many of the data in this report are delayed by two months.

Advertisement

For example, the data on central banks' holdings of U.S. Treasury bonds shown in the report for the middle of June are the data from April.

In April of this year, China resumed selling U.S. Treasury bonds, but the reduction was only $400 million.

The UK, on the other hand, sold off more than $30 billion worth of U.S. Treasury bonds.

Unexpectedly, Japan, after increasing its holdings in March, increased its holdings by more than $30 billion again in April, offsetting the UK's reduction.

However, the cumulative amount sold by the top ten holding countries and regions is not as much as the amount sold by the Federal Reserve alone.

The data provided by the Federal Reserve is more timely than that of the Treasury Department, showing that in May alone, the Federal Reserve sold $101.491 billion worth of government bonds.

This means that even if countries like China and the UK are selling U.S. Treasury bonds, the total amount is not as much as what the Federal Reserve sold in a single month.

Over the past year, the amount of U.S. Treasury bonds held by the Federal Reserve has also been continuously declining from its peak, reducing by nearly $800 billion.

The Federal Reserve's continuous selling of U.S. Treasury bonds under the guise of quantitative tightening can truly be called frantic behavior.

In the past, the U.S. Treasury Department continuously issued U.S. Treasury bonds, and the Federal Reserve backed this up by continuously purchasing U.S. Treasury bonds, ensuring the stability of U.S. Treasury bond prices and allowing central banks from various countries to buy U.S. Treasury bonds with confidence as foreign exchange reserves.

But now the situation has changed.

The Federal Reserve is selling the U.S. Treasury bonds it bought in the past, but at the same time, after the U.S. Treasury Department obtained approval from Congress, it has started to issue new U.S. Treasury bonds frantically.

J.P. Morgan revealed that the U.S. plans to issue $850 billion in U.S. Treasury bonds in the next four months, striving to issue at least $1.1 trillion in U.S. Treasury bonds by the end of this year.

Data shows that by the end of May this year, the U.S. Treasury Department had less than $30 billion in cash left, which also needs to be invested in other expenditure items, and it will be further away from the U.S.'s target.

Therefore, it seems very likely that the U.S. will issue $1.1 trillion in government bonds.

Now the Federal Reserve has raised the federal benchmark interest rate to over 5%, so the yield on newly issued U.S. Treasury bonds has also increased accordingly.

The yield on recently issued short-term U.S. Treasury bonds has already reached as high as 5.15%.

The U.S.'s increase in the interest rate on government bonds is also to attract everyone to buy.

If the interest rate on government bonds rises, it will definitely drive up the interest rates in the entire financial market.

This is undoubtedly a blow to the entire financial market and even the U.S. macroeconomy.

Under such circumstances, holding U.S. Treasury bonds, although the yield is high, the risk is even higher.

Therefore, the Federal Reserve's selling seems not only to be for quantitative tightening, to control inflation, but possibly more importantly, to reduce the risk of U.S. Treasury bond losses it faces itself.

Then it also hopes that this risk will be borne by other countries.

Imagine one day in the future when China and the U.S. really have a military conflict, and the U.S. announces financial sanctions against our country.

At this time, the U.S. Treasury bonds in our country's hands will become useless waste paper.

However, the value of gold always exists because gold is a recognized financial strategic resource, and no one will deny the value of gold.

After all, the safety is indeed very high.

This is also one of the most important reasons why we have been continuously reducing our holdings of U.S. Treasury bonds and increasing our holdings of gold in recent months.

In terms of countering the dollar hegemony, the most successful typical country is Russia.

When Europe and the U.S. sanctioned Russia in terms of settlement currency, Russia turned to use the renminbi, and even recently promoted Pakistan to use the renminbi for oil trade with Russia.

This method is worth promoting to other countries to jointly deal with the future U.S. Treasury bond crisis.