And thirdly, there is growing debate over whether China could dump its $1.13 trillion of US treasury bills
. If that happened, it could lead to a surge in interest rates that could substantially damage the US economy in the short term.
As the late MIT economist Rudi Dornbusch pointed out, it makes more sense for residents of poor countries to invest their resources at home in ways that raise productivity and living standards, rather than buying US Treasury bills
. Yet when China began running a continuous trade surplus, its per capita income was just above $400.
In a financial panic, investors lose confidence in all forms of credit, retreating to the safest and most liquid assets, like US Treasury bills
The credit quality of the US treasury fund is extremely high, reflecting its exposure only to securities, instruments and obligations issued or guaranteed by the US government, such as US treasury bills
, notes, trust receipts and other obligations of the US treasury and repurchase agreements.
Despite the impressive equity rally, the price of longer-term US Treasury bills
was higher at the beginning of December than at the start of the year.
Global demand for dollars includes a huge demand for dollar-denominated financial investments such as US Treasury bills
, which are seen as arguably the world's safest investments.
The three main sources of income are the coupon payments it gets on its holding of government securities, the interest it receives from banks which borrow money from it (repo operations) and also interest incomes on its holdings of sovereign bonds like US treasury bills
He also said China's large holding of US debt notes is not a major threat to US security because China cannot afford to destabilise the US currency and economy and that US Treasury bills
The US Federal Reserve has been buying $85 billion worth of mortgage-backed securities and US treasury bills
since 2009 in a bid to keep interest rates low to spur economic growth.
US Treasury bills
are the foundation of the global financial system, a supposed risk-free investment that underpins everything from retirement portfolios to China's export-driven economy.
Products listed on GovEx include highly liquid on-the-run, when-issued and first-available off-the-run US Treasury bills
, notes and bonds.
THE Enforcement Directorate ( ED) has stepped in to look into the case of a Tamil Nadu businessman from whom US treasury bills
worth $ 5 billion ( ` 28,000 crore) were seized on the New Year Eve.