Russia has sold nearly half of its US bonds. US Treasuries used to account for a large part of the investment portfolio of the Bank of Russia. “Forex and gold reserves consist of the metal part represented by gold and investment in securities and liquid currencies. Russia invested a lot in US dollars as it is the most secure and tradable global currency,” Mikhail Belyaev, a chief economist of the Institute of the Stock Market and Management, commented on the recent sell-off of US Treasuries.
There are several reasons behind the big sell-off. First, US sanctions have dealt a blow to major Russian companies and individuals who are at the helm. Besides, the government is interested in keeping the national funds in safe diversified holdings. At present, the odds are that steady yields of US bonds will decline in the short run. The US has declared a large-scale trade war with most of its trade partners. Interestingly, the US dollar remains unaffected by Trump’s protectionist trade policy. However, US Treasuries are facing a threat. “Therefore, it would be better to withdraw the national money from the US debt market. The logical question is what will be a good idea for investment. There are few options. It will be a hard challenge to invest in securities of other countries as the US Treasuries proved its reliability,” Belyaev explains.
The Bank of Russia decided to allocate funds, collected from selling US debt securities, for increasing gold reserves. The regulator does not consider using this money as public spending. “If used as public spending, this money will never replenish gold and forex reserves,” Bank of Russia Governor Elvira Nabiullina responded to journalists’ question where the regulator channeled the money from selling US Treasuries.
