"Toxic component": why Russia has sharply reduced investments in the American national debt

Russia has cut its investment in US government bonds (Treasuries) at a record.

This is evidenced by the data of the US Treasury.

According to the materials of the department, in March 2021, the total amount of Moscow's investments in US Treasury securities fell by almost a third - to $ 3.98 billion.The value became the lowest in the last year.

Treasuries of the US Treasury are debt obligations guaranteed by the government of the country.

States buy securities and receive a stable income from them.

In other words, holders of government bonds lend their money to the American economy.

Note that today in the total volume of US debt ($ 28.1 trillion), about 25% falls on treasury securities.

At the same time, the largest volumes of Treasuries belong to Japan (in the amount of $ 1.24 trillion), China ($ 1.1 trillion) and the UK ($ 443 billion).

It is noteworthy that until 2018 Russia was also one of the main holders of American debt.

So, back in December 2017, the country was the 15th largest buyer of US government bonds.

At that time, Moscow owned treasuries worth about $ 100 billion.

A sharp sell-off in US government bonds began in the spring of 2018.

Then, from March to May, against the background of the introduction of new sanctions by Washington and the aggravation of geopolitical risks, Russia reduced investments in Treasuries by more than six times - to $ 14.9 billion. Since then, the figure has not risen above this mark.

By refusing to buy large amounts of United States debt securities, Russia is trying to secure its reserves.

This opinion was shared by the chief analyst of the TeleTrade Group of Companies Pyotr Pushkarev in an interview with RT.

According to him, as an alternative to American treasuries, Moscow has begun to actively invest in government bonds of other countries.

“Russian reserves are able to accumulate quite safely further and without investing in the US national debt.

Government securities of the eurozone countries, Australia, Canada and China are absolutely no worse in value now on world markets.

All of them are no less liquid, but unlike the American ones, they are devoid of a toxic political component, that is, they do not carry threats of future sanctions or, moreover, the danger of freezing assets, "Pushkarev explained.

According to the Central Bank, from January 2018 to December 2020, the share of the dollar in the international reserves of the Central Bank more than halved - from 45.8% to 21.2%.

At the same time, the share of the euro increased by almost a third - from 21.7% to 29.2%, and the yuan - fourfold, from 2.8% to 12.8%.

Moreover, in February 2021, the Russian Ministry of Finance transferred 15% of the National Wealth Fund's resources in yuan and another 5% in Japanese yen.

At the same time, the shares of dollars and euros decreased from 45 to 35%.

"The stability of the volume of national reserves, which is achieved with the diversification of the structure of reserves, and the stability of the ruble exchange rate at the current stage are the main driver of economic recovery, affecting, first of all, the level of real incomes, consumption, the inflow of foreign investment," the analyst said in an interview with RT IC "Freedom Finance" Evgeny Mironyuk.

Looking back at the dollar

According to Pyotr Pushkarev, the decrease in the share of dollar-denominated assets in Russian reserves allows the Central Bank to avoid settlements with American government agencies.

At the same time, investments in debt securities of other countries often bring higher returns, the expert is sure.

According to him, to a certain extent, Russia is forced to sell American debt securities by the policy of the US Federal Reserve System.

In 2020, amid the coronavirus pandemic and the collapse of the US economy, the Fed began printing dollars in unlimited quantities.

With these funds, the regulator began to independently buy out Treasuries and thereby pump up the country's financial system with money.

An increase in the money supply in the economy should help to increase the rate of GDP growth.

At the same time, the Fed's actions provoked a weakening of the dollar in the world market.

Over the past year, the corresponding DXY index has fallen by almost 10% and is now close to 89.7 points.

“The American establishment is ready to continue to flood the financial system with direct cash infusions, not paying attention to the bursts of dollar inflation.

Under these conditions, the dollar continues to weaken against a basket of other reserve currencies, and it may be advantageous for the Central Bank of Russia to further reduce the share of reserves in American treasuries, "Pushkarev emphasized.

According to the expert's forecast, if the current situation in the global financial market changes, the Central Bank may slightly increase Treasury purchases.

At the same time, as the analyst emphasized, the volume of investment in debt securities is important for Russian reserves, but at the same time they are not a defining indicator of economic relations between Moscow and Washington.

“A more significant factor for the economic world may become the preferential investments in“ green ”technologies in Russia for foreign, including, of course, for American companies, already announced by Vladimir Putin at the climate summit.

It is also beneficial for us to develop them: such a commercial foundation can be stronger than holding treasuries in the portfolio of the Russian Central Bank, ”concluded Pushkarev.