Given a debt to America: why Russia is buying up US government bonds

The growth of Russia’s investment in the US public debt is due to short-term factors, the main of which is the desire to find a “safe haven” for a short time, until the uncertainty around the pandemic settles down.

In the long run, the Russian financial authorities continue to pursue a course to diversify their investments, primarily due to alternative currencies and gold.

According to the US Treasury, in April 2020, Russia increased its investment in US government securities by almost 80% to $ 6.85 billion. Of this amount, 2.84 billion dollars accounted for short-term securities and 4.014 billion dollars – for long-term ones.

rambler without adsIn March, Russia, on the contrary, tripled these investments, which was the first such significant reduction in investment in US government bonds in recent months.

Then the size of US Treasuries in the Russian portfolio was less than 3.9 billion dollars. Prior to this, in February-January, Russia increased investments in this asset after a reduction in December 2019.

Moreover, the Russian Federation is not among the thirty largest holders of American debt. Japan remains in first place on this list, its investments for the month fell by $ 5.7 billion – to 1.266 trillion.

China is in second place with $ 1.072 trillion (a decrease of 8.8 billion). Next comes Great Britain ($ 368.5 billion), which reduced the volume of bonds on its balance sheet by 26.8 billion

MODERN INVESTMENTS

The growth of Russian investments in the US public debt remains very modest, experts interviewed by Prime agree. “The volume of investments increased by only $ 3 billion,” says BCS Prime economist Anton Pokatovich.

In his opinion, against the backdrop of continuing uncertainty regarding the recovery of the global economy, and as a result, the stability of the market environment, a very moderate increase in “quality” in the structure of the CBR investments seems to be appropriate.

“At the same time, these steps fully fit into the tactical actions of the Central Bank of the Russian Federation to diversify the structure of its investments and are unlikely to be associated with any global changes in the positioning of the Russian Federation in relation to the United States,” he believes.

Experts recall that in 2010 the volume of US Treasuries (UST) in the Russian debt portfolio amounted to $ 170 billion. Since then, it has declined by more than 20 times. A return to those levels – at least in part – is out of the question.

LAY STRAWS

According to the associate professor of the Department of Economic Theory of REU named after G. V. Plekhanov Oleg Cherednichenko, the growth of investments in the US public debt in April occurred against the background of two complementary factors.

“On the one hand, US budget spending began to rise sharply due to the need to combat the pandemic, provoking an increase in external borrowing. On the other hand, the instability of world markets is now so high that in the face of the American economy, Russian investments have found a kind of short-term and relatively stable harbor. “, He explained.

This fact is indirectly confirmed by the structure of new Russian investments: of the $ 3 billion increase in short-term securities, the bulk of $ 2.939 billion was directed, the expert added.

ASSET DIVERSIFICATION

In the long run, the Russian authorities still adhere to a strategy aimed at investing reserves in currencies other than the dollar, as well as in gold. “In our opinion, in the near future, the growth of Russian investments in the UST will remain limited,” says Pokatovich.

Also, one cannot exclude the possibility of a return to a reduction in the volume of these investments against the background of the currently observed intensification of the US sanctions rhetoric in relation to Russia.

According to Cherednichenko, much will depend both on the global situation and on the level of political and economic relations that Russia and the USA will come to by the end of this year.

“This will be largely determined by the election results in the United States,” he added.

On the other hand, the American public debt is a highly liquid, stable instrument used by the leading economies of the world, and it is possible that once the market conditions develop in such a way that it will again be profitable for Russia to seriously increase its share in its portfolio, experts conclude.