Record budget spending bad US debt big creditor needs to adjust strategy

Investment banks are predicting a 10-year Treasury bond yield will rise, China and other big lenders need to adjust strategy authors: Reporter Zhangmozeng/beijing February 1, the U.S. government submitted a record budget to Congress, industry experts believe that this will be bad for the U.S. Treasury bond market,　　China and other big foreign lenders need to adjust their strategy. On that day, U.S. President Barack Obama presented Congress with a record total of $3.83 trillion trillion in the 2011 fiscal year, the annual budget for the United States, which topped the 3 trillion dollar mark for three consecutive years. The report also predicts the US fiscal deficit for fiscal year 2010 will hit a record $1.56 trillion trillion.　　The budget will need congressional approval before the dust settles. According to the report, the U.S. budget for fiscal year 2010 was $3.72 trillion, which grew 5.7% per cent in the 2009 fiscal year, while spending in the fiscal year 2011 increased 2010 over the 3% fiscal year. Fiscal year 2011 starts October 1 this year. "In fact, the report is good for the U.S. economic recovery, and spending money to solve real problems can boost the economy."　　"Chen Bingcai, a researcher at the National Administration Institute's consulting Department, told the Economic reference Journal. While the strong performance of the US stock market in the day underpins the bullish view, the negative impact of the excess deficit appears to be greater. In the next 10 years, the industry expects the U.S. federal fiscal deficit to remain at a high level of 4.5% compared with GDP, well above the 3% that most economists consider acceptable. In his first State of the Union address last week and his weekly speech, Mr Obama stressed twice that a record deficit would pose a threat to the recovery and said it had to be controlled, but that does not seem to be immediately reflected in the action. Some investment bank analysts believe that the recent outbreak of Greek debt is only a warning, there will be more advanced economies than the emerging countries in the financial problems.　　More expansionary fiscal policies expected by the major economies could add to the financial burden. "Mr Obama is under pressure to convince key creditor countries such as China that he can take convincing plans to rein in America's fiscal deficit and the size of its debt. Reuters said 1st. "We are playing with fire. Foreign countries are noticing the failures of our management, "said Billgalston, a senior analyst at the Brookings Institution in Washington, D.C.," that the dollar is at risk as the world's reserve currency and as a global leader in the U.S. economy. "And the Wall Street Journal's 2nd report said that the U.S. government spending this year, 1 dollars per 3 dollars is borrowed.　　The high level of US Treasuries has weakened America's position and freedom of action, while strengthening the status of China and the rest of the world. The trend of US Treasuries is being further suppressed. According to market analysis, the Treasury will issue more bonds in 2010 years, and the Federal Reserve in 2010 years will no longer buy a large number of Treasury issue, instead the Federal Reserve could sell up to $2.5 trillion trillion of bonds and tips this year, which would have a huge impact on the bond market. "The world is rebuilding its own balance, and a fall in the US deficit and a fall in the balance of payments in other countries means that Treasuries will become increasingly difficult to sell."　　Zhao, a senior researcher at China Construction Bank, said to the economic reference journal. At present, the yield on the 10-year U.S. Treasury bond is 3.68%. Investment banks such as Goldman Sachs and JPMorgan Chase are also reporting forecasts that the yield on the 10-year Treasury note in 2010 will rise further to 4.14% per cent on the basis of 2009 3.84%.　　The rise in Treasury yields means a further contraction in the price of Treasury bonds. "The increased risk of US Treasury bonds has made China face a more cautious choice," he said. "Chen Bingcai said. According to the International Capital Flow report (TIC), released by the US Treasury on January 19, China held 789.6 billion U.S. Treasury bonds as of the end of November 2009, and remains at the top of all creditors. "US Treasuries" bind China and the United States tightly together, and this hot potato has put the Chinese into a dilemma.　　China's leaders on several occasions stressed the need to "guarantee China's assets in the United States security." "Coping with the volatility of US Treasuries is a long-term strategic issue." Now what is to be considered is what will happen to China if the U.S. government is issuing more debt? Or what should we buy? Consider buying more local debt, company equity or other investments.　　"Chen Bingcai said. And Zhao said China should pay attention to this situation to keep up with the increase in foreign exchange reserves. By the end of December 2009, the balance of national reserves was 2.3992 trillion U.S. dollars, an increase of 23.28% per cent, a record high. According to the Zhao calculation, 2009 years ago 11 months of foreign exchange accounted for the increase of 2.2 trillion yuan, and 2008 year of foreign exchange accounted for the increase of 3.54 trillion yuan, he estimated if the continuation of this trend, foreign exchange inflows will continue to fall in 2010 years. "A fall in the double surplus will reduce the pressure on the foreign exchange reserves to rise, and the issue of US Treasuries will not be that tricky." "Zhao said.