GOVT: CBO Predicts Massive New US Debt Supply, While Geopolitics Reduces Foreign Demand

Summary

• The flurry of news regarding new bilateral currency swap deals and other forms of new non-dollar or euro financial infrastructures being implemented seems to be intensifying.
• With $7.3 trillion of US government debt held by foreigners, there is a very real risk that the continued diversification away from USD in global trade could lead to a sell-off.
• The timing and magnitude of the selloff event are both unknown, but a reduction in the need to have USD assets on hand for trade and business transactions makes it a near-certain event.
• The CBO is predicting a massive surge in debt being issued in the next decade, which might come at a very bad time if foreigners stop buying.
• The iShares Core U.S. Treasury Bond ETF offers investors a path to gaining exposure to US treasuries. At this point in time, it is more risky, even though the recessionary environment may seemingly make it an attractive traditional safe haven investment choice.

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Investment thesis: With more and more talk of a recession or at least a severe global economic slowdown this year, even as the Federal Reserve is still signaling interest rate hikes, safe haven investment opportunities tend to become

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