Treasuries refer to United States Treasury Securities. These Treasuries are United States government debt that is actually issued and sold by the Department of the Treasury via the Bureau of Public Debt. The U.S. government uses its Treasury securities to finance the enormous and rising debt of the Federal government.
In common and investor vernacular, these treasury securities are commonly simply called Treasuries. Four different kinds of treasury securities exist. These are Treasury notes, Treasury bills, Treasury bonds, and TIPS, or Treasury Inflation Protected Securities.
Other types of treasury securities are not marketed. These are comprised of savings bonds, Government Account Series debt given to trust funds that the government manages, and SLGS, or State and Local Government Series. The former marketable Treasury securities prove to be extremely liquid and also are traded significantly on the secondary market.
The latter mentioned non marketable Treasury securities are only sold to subscribers. They may not be transferred back and forth via market sales. The vast majority of U.S. Treasuries are actually held by other countries.
As of January 2010, the top five largest holders of American Treasuries turn out to be China with $889 billion, Japan with $765.4 billion, the combined oil exporting nations with $218.4 billion, the United Kingdom with $206 billion, and Brazil with $169.1 billion.
China and Japan combined hold an enormous $1.6 trillion worth of U.S. Treasuries. These and other foreign countries have become such a large component of U.S. Treasuries debt purchases that many economists have grown afraid. They fear that since foreign nations now account for such a great percentage of U.S. Treasuries that should they decide to stop purchasing them, the U.S. debt and economy might simply collapse.
The possibility that this is true has caused many observers to believe that the two economies of the United States and China are inextricably linked. Both countries are afraid of what would happen if the Chinese slowed their purchases of U.S. Treasuries.
When Hillary Clinton, the U.S. Secretary of State, visited China earlier in 2010, she insisted that Beijing monetary authorities keep buying United States Treasuries. Her argument centered on the hope that this will pump the American economy back up, which would stimulate Chinese goods’ imports back home.
China has demonstrated its frustration over the possible decline in value of its U.S. Treasuries holdings too. The Chinese Premier Wen Jia Bao has expressed concern and a warning that the Chinese holdings of U.S. Treasuries could be downgraded and devalued if Washington can not get its runaway debt under controlled.