Saudi Arabia, America’s staunch ally, could torpedo the US bond market. Independent observers noted that at present Saudi Arabia is suffering from a range of problems spurred by a continuous drop in crude oil prices. The country’s government is reconsidering its budget in an attempt to reduce spending.
Saudi Arabia does not have enough money; that is why it may start selling US bonds in order to meet the budgetary commitments. Experts suppose that the sell-off can throttle the US bond market.
Saudi Arabia burnt through a huge amount of foreign currency reserves that came up to a total of $100 billion in the previous year alone. This was made with a view to offset the largest budget deficit in 25 years. It is also considering selling a piece of its crown jewel, state oil company Saudi Aramco.
Moreover, if the situation aggravates, the ruling elites will have to sell real jewelry to cushion the budget. Thus, it is highly possible that Saudi Arabia will resort to US bond selling. This speculation gave rise to a wave of concerns, deepened by the fact that the kingdom’s Treasury holdings are believed to be among the largest in the world.
