Saudi Arabia's US Treasury Bonds

Fun with supply and demand.
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ElectricMonk
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Saudi Arabia's US Treasury Bonds

Post by ElectricMonk » Fri Jan 22, 2016 10:13 am

http://www.bloomberg.com/news/articles/ ... me-crucial

Oil producers everywhere have significant chunks of treasury bonds - a necessity if you sell oil in $. But for political reasons, the amount of bonds held by OPEC nations is not separately disclosed - we don't know how much of that $289billion belongs to the Saudi Kingdom.
But given that low oil prices have hit all oil producers hard it's unlikely that they will keep buying US debt - more likely, they will start selling.

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ElectricMonk
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Re: Saudi Arabia's US Treasury Bonds

Post by ElectricMonk » Sun Apr 17, 2016 5:18 am

http://mobile.reuters.com/article/newsOne/idUSKCN0XD10S

Looks like Saudi Arabia actually has control over $750bn in bonds - and they threaten to sell them.

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Re: Saudi Arabia's US Treasury Bonds

Post by Gord » Sun Apr 17, 2016 5:30 am

:facepalm:
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Re: Saudi Arabia's US Treasury Bonds

Post by Tom Palven » Tue Apr 26, 2016 12:40 pm

If Ron Paul has his way, "It should be known that the US will no longer guarantee the security of the Saudi kingdom."
https://www.lewrockwell.com/2016/04/ron ... arabia-us/
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Re: Saudi Arabia's US Treasury Bonds

Post by Matthew Ellard » Wed Apr 27, 2016 12:27 am

ElectricMonk wrote: Looks like Saudi Arabia actually has control over $750bn in bonds - and they threaten to sell them.


I think the Saudis are "all over the shop" at the moment and individual princes are all saying different things.

I read the Saudi government's "Vision2030" for removing its economic dependence from oil. It makes no sense what so ever. It is a fantasy document that envisages Saudi Arabia investing so much money overseas that the entire country can live off its overseas investments. It would be like England predicting, in 1775, that England could live off all its colonies.
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Re: Saudi Arabia's US Treasury Bonds

Post by bobbo_the_Pragmatist » Wed Apr 27, 2016 1:03 am

I don't understand T-Bills at all, nor oversees investment income.

On T-Bills, it may amount to "the same issue" but I thought the exposure of the USA was more that "additional" T-Bills would not be purchased in the future? It is the same issue if in fact most T-Bills are issued to cover the repayment of those being cashed in?

As to investment income....isn't it mostly exposed to degradation via inflation? Maybe a long term enough pay out to make this viable especially when there may be little to none, or only one (0il production) as an alternative..... course, as long as we stay stupid, there is always drugs and gambling....Muslims could incorporate it as part of their anti-heretic jihad plan.

with all their unemployable engineers, I thought the Arabs becoming experts in solar energy, and energy independence based on solar, was a good move. Just not a quick fix?
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Re: Saudi Arabia's US Treasury Bonds

Post by Matthew Ellard » Wed Apr 27, 2016 2:24 am

bobbo_the_Pragmatist wrote:I don't understand T-Bills at all, nor oversees investment income.


The USA will issue a Treasury Bill for say 10 million dollars, to pay for domestic capital works, with a fixed coupon repayment rate (Fixed interest) for anyone to buy.

Saudi Arabia will transfer 10 million to the USA Treasury and buy that bill.

Saudi Arabia can then either receive the coupon rate payments and thus receive interest and capital back for profit, or sell the bond to a third party. The bearer of the bill then receives the benefit of the repayments. (This is how government bond hedging works buy exchanging different risk bills with different coupon (interest) rates)

What Said Arabia is doing is is threatening to not buy USA Treasury bills with their low coupon rates, as China is also reducing its bill purchases, thus forcing the USA to increase the coupon (interest rate) to attract buyers. However, the USA Treasury has many other happy customers and there is no world recession going on, reducing the number of available cash rich foreign customers.

Traditionally the USA was able to issues bonds with low (interest) coupon rates as its economy was the strongest and thus offered the highest level of security on honouring bonds. That is still somewhat true today and why Countries like Australia ensure we have a AAA+ rating so as to be able to issue government bonds at the lowest coupon rate.