Russia has sharply reduced investment in US government bonds (treasury bonds). This is evidenced by the US Treasury. According to the materials of the department, in May 2020, the total amount of Russian investments in treasury securities of the United States decreased by almost $ 1.5 billion - to $ 5.4 billion.
Treasury of the US Treasury Department is a debt guarantee guaranteed by the government. States buy securities and receive stable income on them. In other words, holders of government bonds lend their money to the American economy.
According to the US Treasury, today in the total amount of US debt ($ 26.5 trillion) about 25% falls on treasury bonds.
Note that since the beginning of 2020, Russian investments in US government bonds have decreased by almost half. As explained to RT by the head of the analytical department of AMarkets Artyom Deev, due to the gradual abandonment of the treasuries, the Central Bank is trying to secure Russia's foreign exchange reserves.
“The fact is that a high volume of investments in treasury can be used as a tool for manipulation by the United States. It is easier for a country that holds significant funds in the US public debt to dictate its terms or, for example, threaten sanctions, ”said Deev.
Recall that the sharp sale of US government bonds occurred in the spring of 2018. Then, from March to May, investments decreased by more than six times - from $ 96 billion to $ 14.9 billion, as a result of which Russia was one of the largest holders of US government debt. At the end of 2019, Moscow reduced its investments in treasuries by 24.5%.
“For Russia, investing in American debt does not look so secure and carries a certain geopolitical risk. Now we see that with the approach of US elections, sanctions rhetoric has again intensified, so the withdrawal of Russian money from treasuries may continue in the near future, ”said Anton Pokatovich, BCS Premier economist in an interview with RT.
According to analysts, the withdrawn funds the Central Bank mainly distributes in favor of gold. According to the Central Bank, over the past year, the share of precious metals in the country's gold and foreign exchange reserves has grown from about 13 to 23%. By early July, the corresponding volume exceeded $ 130 billion.
According to the World Gold Council (WGC), in May the Bank of Russia increased its precious metal reserves by 0.5 tons to 2.3 thousand tons. The value became the highest for the entire time of observation.
“Earlier, Russia actively transferred funds from US securities to assets denominated in euros and yuan. Now this trend has ended, since we completely rebalanced our investments. At the same time, the Central Bank has seriously increased gold purchases. Given the observed rise in the price of metal, these investments have fully justified themselves, ”said Alexei Korenev, an analyst with FINAM Group, RT.
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It is noteworthy that in 2020 gold is considered the most reliable financial asset in the world in terms of saving money, according to the WGC. According to the organization’s specialists, in the context of the coronavirus pandemic and uncertainty in the financial markets, investments in precious metals turned out to be more attractive for global investors than buying US government bonds.
“According to our analysis, increasing the share of gold in reserves would improve the performance of a typical central bank portfolio,” the board said.
Since January, gold on the world market has risen in price by almost 18%, and in July, the cost of precious metals exceeded $ 1800 per troy ounce for the first time in nine years. This is evidenced by data from the Comex Commodity Exchange.
Amid rising gold prices, storing money in an American public debt is becoming less and less profitable, analysts say. According to the US Treasury, over the past year, the yield on US government securities with a ten-year maturity has fallen from 2 to 0.6% per annum.
The yield of debt securities directly depends on the interest rate set in the country. Since the beginning of 2020, the US Federal Reserve System (an analogue of the Central Bank) has reduced the rate from 1.5-1.7% to 0-0.25% per annum. The regulator pursues such a policy to stimulate the economy during a pandemic and the threat of recession. At the same time, the actions of the Fed make investments in treasury less profitable.
“To save funds in the Treasury at the present time means practically nothing to earn, and moreover, to sponsor the restoration of the American economy at its own expense. Therefore, the Russian Central Bank over the past few years has reduced investments in US government bonds and transferred to gold - the main tool for saving funds in a crisis. A competent and systematic policy that many countries follow. It also weakens the dependence of states on the dollar, which is also relevant for Russia, ”explained Artyom Deev.