The US is frantically trying to balance its government budget sheet. Reportedly, the Federal Reserve is going to take measures to help the economy. According to some media sources, the Fed will buy out 40% of the US Treasury bonds. This move is sure to deliver a healing effect on the economy as the budget deficit may continue to narrow. Some analysts assume that next year, the US Treasury will need to borrow $1.08 trillion to finance the deficit. Therefore, market players are curious to know who is going to finance this record deficit. It is obvious that the situation requires the Fed’s immediate interference. The regulator is better to switch on its money printing machine. According to experts at Deutsche Bank, the newly printed money will be used to buy US Treasury bonds worth 420 billion dollars, or 40% of the net issue, including bills. It seems that the bond market will face serious problems if the Fed does not step in. The demand among non-residents for US bonds is rapidly falling currently, as the policy of the Fed is completely different from the policy of other major central banks. This difference has increased the US dollar hedging cost, making the currency less attractive to foreign investors.
