US debt worries global markets after Trump’s megapacote; understand

Interest the country needs to pay for credit are high, and investors already question the sustainability of the American debt. US Congress approves Donald Trump’s ‘package’ after Donald Trump’s approval of the United States Congress – a political victory of the Republican president – global markets are monitoring the consequences of the new legislation amidst record levels. The interest that the world’s main economic power needs to pay to get credit in markets are at high levels and investors now question the sustainability of US debt. Who has US debt? The country’s debt is currently in more than US $ 36.2 trillion (R $ 196 trillion), the equivalent of 120% of US GDP, according to the US Treasury. About $ 29 trillion (R $ 157 trillion) correspond to debt securities that the government sells in the obligation market. Most are in the US, but a third of public debt is in the hands of foreign countries, especially Japan, the United Kingdom and China. In addition, since 2020, after a first trade war between China and the US, the Chinese are “undoing the American debt to acquire gold. They do not sell the titles, but also do not renew them when they arrive at maturity,” explains Aurelien Buffault, title manager at Delubac AM. The remaining US $ 7 trillion (R $ 39 trillion) belong to US federal administrations, such as social security funds or federal employee pensions. Why did the interest rate the US pay? US debt is usually attractive in financial markets because it ensures a stable and safe return on investment. However, when the world’s largest economy shows signs of weakness, investors are more reluctant to lend money and require higher interest rates to compensate for the risk. At the end of May, 30 -year -old US title yield surpassed the symbolic limit of 5%, and now oscillates around 4.80%. “The basis of these fears originates from the so-called ‘great and beautiful law’ driven by Donald Trump and approved last Thursday,” says Gregoire Kounowski, an investment advisor to Norman K. The measures of this law “seek to extend Trump tax exemptions in its first term”, which could “increase US debt by between $ 3 and $ 4 trillion dollars [R$ 16 e 22 trilhões]”, he says. When Moody’s agency downgraded the US debt grade in May, it used as justification for increasing indebtedness and its cost in the federal budget.” This was a warning to the market and placed the American debt trajectory at the center of concerns, “says Raphaël Thuin, director of capital market strategies at Tikehau Capital. In its condition of first economy, the US is considered a good payer. Its particularly liquid market also means that investors can buy and sell securities easily and quickly. In addition, the rest of the world used to be interested in lending to the US to dispose of dollars and a safe investment. A refuge value at the same level of gold. But while gold is currently negotiated in record values, the dollar has devalued more than 10% in the first half, its worst evolution in this period since 1973. Uncertainties multiply around the American economy, impacted by Trump’s trade policy, the Middle East and the Federal Reserve (Fed, the Central Bank). Investors seek replacement refuge values, that is, a coin and assets that protect them when volatility and uncertainty increase, “explains Imne Rahmouni-Rousseau, director-general of market operations at the European Central Bank (ECB).” 2011, European financial markets are considered quite attractive by investors, “celebrates. President of the United States, Donald Trump. Jose Luis Magana/AP Photo

Source link