Russia stops reducing its share in US government debt

The United States Department of the Treasury published a report of country-holders of American bonds. According to the report, the total amount of treasury securities owned by Russia in June was $14.9 billion. The same figure was recorded a month ago.

As in May, Russia was not on the list of 31 countries that are the main bondholders, but decline of Russia’s holdings in the first month of summer has stopped. For comparison, from March to May, Moscow sold $80 billion of the US treasuries. Chairwoman of the Russian National Bank Elvira Nabiullina emphasized that the government pursue a policy of diversification and evaluate every risk: financial, economic and geopolitical.

Russia’s investments in Treasuries did not fall below the $100 billion mark from March 2017 to March 2018. The record was set in October 2010, when Russia owned $176.3 billion in US government bonds and ranked the sixth biggest owner in the world.

The senior analyst of BCS Financial Group, Sergey Suverov believes that if the US Congress decides to ban Americans from performing transactions with Russia's national debt, Russia may lower its positions to zero. “Most likely, Russia can reduce its position in the US national debt to zero, but this will be a political decision. I think that in the near future they will wait for the decision of the Congress on sanctions. Until that, no quick actions will be made,” he said.

Suverov explains the strengthening of the dollar against other currencies as the current decision not to reduce the US national debt share. “Other currencies are falling, and the dollar is now the most attactive currency and public debt investment tool,” the analyst said. Moreover, in recent months, the share of Russian holding in the US government bonds “has decreased significantly enough.” He also added that “therefore, there aren’t so many reasonable alternatives to US public debt."

As Bloomberg notes, Turkey is beginning to follow Russia’s example and stay away from American securities as serious disagreements have arisen with the United States since last month, which also led to the mutual duties imposition. From May to June, the share of Ankara in the US national debt fell by 42%, to $ 28.8 billion. Therefore, Turkey has also stopped to be one of the main bondholders.

Main bondholders have also reduced their share. China cut their share by $4.4 billion down to $1.18 trillion. Japan's share fell to $1.03 trillion, which is the country’s minimum indicator over the past six years.

However, the US Treasury emphasizes that the total investment of foreign countries in treasury securities remained at the same level of $6.21 trillion, compared to May. This happened mainly to the countries that had significantly increased their holdings: Great Britain, Luxembourg, Singapore, Cayman Islands, South Korea, Belgium and Italy.

  Russia, American bonds, USA