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Sale of US bonds by Russia was called a targeted blow to the US

Sale of US bonds by Russia was called a targeted blow to the US

July 24 2018 LJ cover – Продажу Россией американских облигаций назвали целенаправленным ударом по США
Tags: Russia, United States, Economics, Analytics

The sale of US bonds by Russia is a deliberate "blow to the US Achilles heel," Western experts believe.

Russia is purposefully hitting the US Achilles heel by selling US bonds and provoking interest rates growth, "InoTV" reports with reference to Business Insider.

Business Insider notes that US President Donald Trump negatively views the increase in interest rates, as at the moment expensive loans that restrain the growth of the economy are beneficial for him, which prevents him from demonstrating the "beneficial influence of his isolationist policy."

However, there is another problem - the financing of the US public debt.

The recent rise in interest rates experts associate with Russia, which has almost completely abandoned the role of the creditor of Washington. From April to May, Russian assets in US government bonds fell sharply from 96 billion dollars to 15 billion.

Western experts believe that this is due to the Kremlin's fears that after the anti-Russian sanctions adopted in early April, the penalty measures could extend to the trade in American bonds. Therefore, their sale is a way of securing against confiscation.

At the same time, the release of securities strengthens the Russian ruble. In addition, Russia is betting on the diversification of its foreign exchange reserves, and also wants to get rid of dollar dependence.

In this regard, Moscow's actions look like a "targeted blow to the US Achilles heel," because the US dependence on its creditors has increased significantly due to the increase in the budget deficit.

However, in comparison with China, Russia is a relatively small creditor, and if Beijing decides to "cover the money crane," the consequences will be much more serious.

For example, in January, rumors that China is suspending the purchase of US bonds, provoked a sharp increase in interest rates.

It is noted that the PRC owns securities worth 1,18 trillion dollars.

At the same time, Trump threatens Beijing with such import duties that China can "repay the same coin" by making the sale of American bonds one of the ways of revenge.

But selling even a portion of the securities can cause a boomerang effect, and the remaining bonds will depreciate. All this will harm China itself.

At the moment, the PRC suffers from a weak renminbi: in 2015-2016 years, a sharp fall in the exchange rate of the local currency led to serious unrest on the stock exchange. To avoid a recurrence of the situation, Beijing can take measures to strengthen the currency, and one of them - the sale of US bonds.

The newspaper VZGLYAD analyzed in detail the situation around the cut-back of Russia's investments in the US public debt.

Natalia Anufrieva
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