Fed passes China to become largest U.S. creditor

[GlennO]

June 9, 2011, 4:11 PM ET
Fed passes China to become largest U.S. creditor

The Federal Reserve has surpassed China as the single largest creditor of the U.S. government.

UniCredit’s Chief U.S. Economist Harm Bandholz is out Thursday with the details:

As a result of its asset purchase program (QE2), the Federal Reserve at the end of 1Q held about 14% of total outstanding federal debt (debt held by the public). It is, therefore, now the single-largest creditor of the US government.

According to separate data from the Treasury Department, China is ranked second. It owned in late March Treasuries worth USD 1,145bn, which is slightly less than 12% of the total amount outstanding.

After the Fed and China, the biggest holders of U.S. debt are

- the household sector
- Japan

- state and local governments
- and private pension funds.
In addition:

By the end of this month, the Fed will have boosted its Treasury holdings by another USD 250bn (annualized 1tr), and will own about 16% of all outstanding Treasuries (not to mention the 15% of GSE mortgage-backed securities)…

As QE2 ends in three weeks, the critical question remains, “who will buy them thereafter?” We think that private households and foreign investors, who have both been very cautious in recent months, will ramp up their Treasury purchases again. But they might ask for higher yields than the US central bank did.

Bond bulls beware!

MarketWatch.com

[Kenny64]

Who wants to buy government bonds!!
Silver and Gold is a better hedge against inflation.

[Claire Voyant]

QE2 as did his twin, QE1 . . .only artificially propped the economy up and prolonged the inevitable. Many, myself included, believe after QE2 ends, the house of cards will finally give way, though may take a handful of months or so.