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Finally, Asian central banks have funneled a massive amount of their reserves into U.S. Treasuries, reducing the amount of outstanding Treasury debt available for private investors a trend that Economy.com believes has led to a scarcity premium in bond prices and thus artificially lower yields.
The government is also likely to buy back more outstanding Treasury securities.
In mid-January, the Treasury announced plans to buy back and retire up to $30 billion in outstanding Treasury debt by the end of the year; some $2 billion worth has already been bought.
During the full year of 2009, the volume of outstanding Treasury securities owned by the public — as opposed to United States government agencies like the Federal Reserve or the Social Security Administration — rose by $1.4 trillion, a 23 percent gain, to $7.8 trillion.
Under the proposal that G.M. made this week, bondholders would get 10percentt of the company for their unsecured debt, while the government would receive 50percentt in exchange for forgiving at least half of G.M.'s outstanding Treasury debt by June 1, which G.M. estimates would be about $10 billion.
Foreigners, who hold nearly half of outstanding Treasury debt, have been less active buyers at auctions this month.
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