What if Europe sold a large quantity of US Bonds?

[marko]

I'll take "Things that won't happen" for $400, Alex.

 

[USGrant1962]

I'll take "Things that won't happen" for $400, Alex.

Yea, and on top of that the statement from Deutsche Bank is kind of a mess. The $8T number floated is bonds and equities; and much (most?) of both are owned by private buyers, whether they be banks, individuals or corporations.

 

[Running_Man]

Resources that we could easily negotiate access to if we want.

Not true Greenland has resolutely stopped mining of minerals and resources on the island and they do not want mining to occur, their political party that won in 2021 ran on such a platform. They survive as an island by drawing Denmark stipends from the Denmark wealth fund, not by selling their mineral deposits.

 

[Quantum_Computer]

I don't accept that resources are the reason to want Greenland. The Greenland Ice Sheet thickness averages 1 mile, and gets to nearly 2 miles in central areas. The ice sheet covers about 80% of the island. I can't imagine attempting to mine for rare earth elements, or any other elements for that matter.

 

[SnowballCamper]

If whole European countries managed to sell their UST holdings somehow, prices would likely drop, treasury interest rates would rise, so mortgage rates would rise, but that's not what POTUS wants. Then the sellers would have mountains of cash that needs to go somewhere. European bonds are generally at lower rates than treasuries nowadays. So they'd have lower yields if the money stayed domestic. It looks to me like both sides loose. I guess this is why the treasury selloff hasn't happened yet, and probably won't for years into the future.

 

[pb4uski]

^^^ But what if they just stopped buying and held their current holdings to maturity and reinvested interest and maturities elsewhere.... that might mitigate their hurt. Perhaps they would not get as much yield elsewhere, but there are larger issues at play than yield. They would lose less and the significantly lower demand would cause US to have to offer better rates and could cost us.

But, if SCOTUS rules against tariffs in the next few weeks as many observers think will happen it mayall be moot since the threatened Eurpoean tariffs are using the same statutory authority that is under consideration in the SCOTUS case.

 

[Montecfo]

Selling large amounts would likely lower the price - leaving what they don't sell being of less value.

Plus, as someone mentioned, what do they want to hold that value in? Bit coin? Art w*rk? Euro Bonds?

Yes. Mass selling of US bonds is really not feasible for a variety of reasons.

 

[Onda]

1. Demand for U.S. Treasuries would drop like a rock.
2. The U.S. would still need to issue massive amounts of debt.
3. Treasury yields would have to rise sharply to attract buyers.
4. Debt-service costs would jump from ~$1T to $1.XT annually.
5. Higher yields would ripple through mortgages, equities, and inflation risk.

Bottom line: Europe dumping Treasuries would force a fast, painful repricing of U.S. fixed income.

If you owned U.S. Treasuries, you’d get royally screwed… and if you were the EU selling them, you’d discover you just screwed yourself too.

 

[Alan]

Many posts have been deleted once the thread dived into politics.