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It's pretty typical for institutions to buy their own government's bonds.
by jcoffland 11y ago
It's pretty typical for institutions to buy their own government's bonds.
- Gibbon1 11y agoI don't have any formal education in economics, but... The reason that a bank holds government bonds is different than the reason a private investor would do so. Government bonds are the strongest type of reserve a bank can hold. Less safe reserves require a discount from face value. So for a bank there is a balance of risk between cheap and safe reserves like Treasuries and more expensive but better returning paper. A bank is always going to hold a mix of paper as a reserve[1]. China? China hold's US debt in order to be able to stabilize their currency against the dollar. And to backstop the value of their currency on the world market. I don't see anything abnormal about any of this. [1] For a bank, if the ratio of loans outstanding vs reserves in hand gets too low they can't loan out any more money. And since a bank makes money on fees inability to make loans is bad bad bad.