Independent Banker - July 2021 - 35

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was about 16%, so while the Fed's
balance sheet is at an all-time high,
it really doesn't own much more of
the total pie than it did in 2015.
What that means is that other
buyers have stepped up their " roll "
as well. What may surprise you to
learn is that it's not other foreign
governments. Those central banks,
which are popularly believed to
own record amounts of dollardenominated
bonds, have actually
shrunk their share of our debt from
41% in 2015 to 29% today. And the
two largest sovereign owners, Japan
and China, amazingly hold fewer
treasuries in absolute amounts than
they did six years ago.
Positive returns
So who's growing their stockpiles
of our debt? Bloomberg reports
that it's a variety of institutional
buyers other than central banks.
Large, diversifi ed investors, state
and private pension funds, mutual
funds and insurance companies are
some examples. In aggregate, they
have been entrusted with investing
As the Treasury's borrowing needs
have skyrocketed since 2019-and
really since 2008-it's a good thing
for you and me as obligors that
we've had a deep-pocketed buyer
at the ready. That would be the
Federal Reserve.
huge amounts of money, and in
the fi rst half of 2021, the allure of
treasury securities, particularly those
with positive real returns, has been
diffi cult to ignore.
As of this writing, the yield
on the 10-year treasury note is
higher than infl ation for the fi rst
time in several years. Among G8
economies, U.S. debt securities
are not only the highest yielding,
they're easily the most liquid, not to
mention most available. So, while
it's understandable for bond buyers
to be attuned to the possibility
of infl ation being " loosed, " we
have some things working in our
favor to keep bond prices at least
theoretically supported.
Education on Tap
Q3 economic update
ICBA Securities and its exclusively endorsed broker Vining Sparks
will produce their next Economic Outlook webinar on July 13 at
10 a.m. Central. Economists Craig Dismuke and Dudley Carter will
discuss monetary policy, stimulus and the economy's emergence
from the pandemic. Visit icbasecurities.com to register. One hour of
CPE credit is off ered.
Bond Academy replays available
Weren't able to participate in April's ICBA Bond Academy? All eight
segments of the program have been recorded and posted to the
Vining Sparks website. Topics from Bond Fundamentals to Analytical
Tools can be viewed by visiting viningsparks.com.
Huge sums of institutional moneys
are likely to be looking for safe
havens for the foreseeable future.
Aging global populations, higher
national savings rates and a Fed
policy that both subsidizes short
interest rates and invests in longerdurated
securities are part of this
dialogue. Ultimately, community
banks stand to benefi t from modestly
higher rates, with some likely
price protection from institutional
investors. The Mailman going to the
basket for a score off the pick-androll
is part of portfolio management
dynamics in 2021. 
Jim Reber, CPA, CFA (jreber@
icbasecurities.com), is president
and CEO of ICBA Securities, ICBA's
institutional, fixed-income brokerdealer
for community banks
independentbanker.org Q 35
http://www.icbasecurities.com http://www.viningsparks.com http://www.independentbanker.org
Independent Banker - July 2021

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