Negative Interest Rates In Europe Means European Banks Buy U.S. Treasuries

The European Central Bank has opted for negative interest rates. Is this why “Belgium” has emerged as a large buyer of interest paying US Treasuries?

Buy Gold Online

How to Buy Gold

JM Bullion

How To Buy Silver

Why Belgium Makes Sense as the Mystery Buyer of Massive Amounts of U.S. Treasuries

It perhaps makes sense now why “Belgium” has been buying massive amounts of U.S. Treasuries recently. If the European Central Bank (ECB) is now going to charge interest to banks to hold money there, far better for European banks to hold their excess reserves* in dollars/U.S. Treasuries that pay some interest.

We have long pondered how would the Fed keep interest rates low if it stopped buying 60-90% of the newly issued U.S. Treasuries. Clearly there was no apparent large replacement buyer that could buy U.S. Treasuries in such amounts.

Last month we noted:

The Fed now holds nearly $2.4 trillion T-Bonds, or about two times as many as China! Since the Fed has essentially become the T-Bond market over the past few years via QE, the question remains, who will buy T-Bonds that the Fed will not buy as it ends QE in the amounts necessary to keep interest rates low? As incredulous as it may seem, it appears that tiny Belgium has taken up that monumental task.

Chart showing that the Federal Reserve has accumulated $2.4 trillion in U.S. treasuries

The Federal Reserve now holds nearly $2.4 trillion in U.S. Treasuries

The U.S. Treasuries bought by “Belgium” are not being bought by the country itself but rather through Euro clear on behalf of a buyer(s). The Treasury Department lists the bonds as being owned by Belgium.

The Fed’s No Exit Dilemma Solved

Perhaps the Fed can continue its tapering of quantitative easing as it has found, with the (coordinated?) help of the ECB, its buyers to replace it as the primary (front running?) buyer of U.S. Treasuries – European banks fleeing negative ECB interest rates.

European Central Bank Negative Interest Rates Help The Fed Exit QE

Get Free Updates From

Subscribe to and get the free In Case You Missed Itweekly email as well as updates and analysis on gold, silver, real estate and the economy.

Also get the free report “Twelve Key Differences Between Gold and Silver” when you subscribe.

*Excess reserves at European banks are about 45% of all reserves. Most large European banks have U.S. subsidiaries. Read more regarding non-U.S. banks holding U.S. Treasuries. The Fed since 2008 pays interest on excess reserves.

Further Reading:

Janet Yellen and Negative Interest Rates

Top Foreign Holders of U.S. Debt

Is a Euro Dollar on the Way?

The Marshall Plan in Reverse- Europe to Buy US Treasuries

Funding the Government without QE

If the Fed Stops Buying Treasuries, Who will Buy Them?

Royal Canadian Mint

Please visit the Smaulgld Store for a larger selection of recommended Kindles, books, music, movies and other items.

Or you can support by making purchases from our affiliates of by making all your Amazon purchases through the search widget below:

Buy American Gold Buffalo Coins

*DISCLOSURE: Smaulgld provides the content on this site free of charge. If you purchase items though the links on this site, Smaulgld LLC. will be paid a commission. The prices charged are the same as they would be if you were to visit the sites directly. Please do your own research regarding the suitability of making purchases from the merchants featured on this site.

The content provided here is for informational purposes only. Making investment decisions based on information published by Smaulgld (SG), or any Internet site, is not a good idea. Accordingly, users agree to hold SG, its owner and affiliates, harmless for all information presented on the site. SG presents no warranties. SG is not responsible for any loss of data, financial loss, interruption in services, claims of libel, damages or loss from the use or inability to access SG, any linked content, or the reliance on any information on the site.

The information contained herein does not constitute legal, tax or investment advice and may be subject to correction, completion and amendment without notice. SG assumes no duty to make any such corrections or updates. As with all investments, there are associated risks and you could lose money investing. Prior to making any investment, a prospective investor should consult with its own investment, accounting, legal and tax advisers to evaluate independently the risks, consequences and suitability of that investment. SG disclaims any and all liability relating to any investor reliance on the accuracy of the information contained herein or relating to any omissions or errors and as such disclaims any and all losses that may result.

Post Navigation