China's Selling, But Who Cares? US Debt Demand Soars

Sure, China's dumping off US debt, but domestic demand is at a peak with $4.3 trillion in holdings, even after the largest foreign creditor (at $1.4 trillion!) rushed to unload its US debt holdings.

Despite China's lack of interest, Americans are picking up more US debt than ever, pushing their share of the $12.9 trillion market to their highest point since 2012, Bloomberg data shows.

While this demand helps keep a lid on American finances, yields remain low, signaling the US economy just isn't strong enough for a Fed rate hike.

"There’s no pressing reason for the Fed to hike rates, and there are clear risks against a global backdrop that’s so fragile," Robert Tipp, the chief investment strategist at Prudential Financial’s fixed-income unit, which oversees $533B, told Bloomberg.

China was the nation's largest foreign creditor during a time when overseas creditors were important in helping the US pull out of the 2008 recession. But China turned back to its own economy when its stock market crashed, depleting holdings by about $200B. 

On the real estate end, economist Lawrence Yun expects the industry to be hit with two reactionary forces as China works out its issues. "With China's stock market crash, the economy is slowing so there is less financial capacity to buy properties," Lawrence told Bisnow. 

"Given the uncertainty in China, the wealthy Chinese people may want to take money out of China and park it here in the US, where they find it safer and much more stable." [Bloomberg]