Why Treasurys are getting harder to sell

Recently, according to the US "Wall Street Journal" reported that the sluggish auction of US Treasury bonds, the market will be difficult to digest the upcoming influx of government bonds, which triggered investor concerns.

Since 2020, the United States has gone further and further on the road of issuing national debt, issuing at least $4 trillion of national debt every quarter. In the first quarter of this year alone, the US issued $7.2tn of Treasuries, the highest quarterly issuance on record. There are many reasons behind the acceleration of issuance and oversupply, which makes US Treasury bonds more and more difficult to sell.

On the one hand, Treasury bond issuance has exploded in recent years, largely due to the huge amount of money raised by the US government to deal with the pandemic and a series of economic stimulus measures. This huge supply of government bonds made the market difficult to digest, and investor demand for government bonds gradually weakened.

On the other hand, the U.S. economy is slowing and the country is heavily indebted, which reduces the return on Treasury bonds. With the increase of uncertainty in the global economic environment, investors are increasingly concerned about the safety and liquidity of funds, and the relative attractiveness of government bonds is gradually weakening.

In addition, some countries and institutions began to adjust their portfolios and reduce their holdings of US Treasuries, further reducing the market demand for Treasuries. These countries and institutions may choose to invest their funds in other markets or assets in search of higher returns or reduced risk.

Notably, inflation is also weighing on Treasury sales. Recent inflation data in the United States have exceeded expectations, and investors are concerned that inflation is not fully contained, which has made them less willing to buy long-term Treasuries. At the same time, the market is widely expected that the Federal Reserve may continue to raise interest rates in the future, which also adds to the difficulty of selling Treasuries.

Taken together, U.S. investors are increasingly worried about the impact of a variety of reasons that have made it harder to sell Treasurys. So what exactly are the effects of the Treasury woes on investors?

First, an increase in the size of the national debt means that there will be more supply in the market, which can lead to pressure on the price of government bonds. As a result of supply and demand, Treasury yields may fall, which is a challenge for investors who rely on fixed income. They may need to look for other higher-yielding investment opportunities or accept a lower rate of return.

Second, the large size of the national debt may raise concerns about the fiscal position of the United States. Investors could start to question the U.S. government's ability to repay its debt, raising concerns about its credit rating. Such concerns could reduce investor demand for Treasuries, further affecting their price and liquidity.

Third, the huge scale of national debt may also have spillover effects on global financial markets. As the world's largest economy and issuer of debt, fluctuations in the U.S. Treasury market can have a significant impact on global financial markets. If investors lose confidence in U.S. Treasuries, it could lead to destabilizing capital flows, which could send shockwaves through global financial markets.

Overall, the huge size of the national debt, slowing economic growth, high debt and inflation problems have combined to reduce demand in the Treasury market, making it difficult to sell debt. Investors need to be on high alert at all times and need to carefully consider these factors when participating in the U.S. Treasury market and make decisions based on their risk tolerance and investment goals.