HMM: Foreign Investors Lose Some Hunger for U.S. Debt. “Decline in demand from ‘indirect bidders’ stirs worries of higher bond yields and slower growth.”

Investors in a broad category known as “indirect bidders,” which includes both mutual funds and foreign investors, have been winning the smallest percentage of the bonds they’ve bid for since 2011, according to bidding data for recent Treasury bond auctions. The average percentage of the auctions won by this group fell for the first time since 2012, a decline some analysts attribute to both lower demand from investors outside the U.S. and their recent tendency to post less-aggressive bids.

The behavior of these bidders is crucial for the ability of the U.S. to fund itself, at a time when the budget deficit is forecast to surpass $1 trillion by 2020 and remain above that level for the foreseeable future. Foreign investors currently hold about 43% of U.S. government debt, the lowest since November 2016, a proportion that has steadily declined from its peak of 55% during the 2008 financial crisis.

The next financial crisis, wherever it hits, will likely get foreigner desperation-buying U.S. debt. But also keep in mind that we’re issuing a trillion dollars of it each year, plus the existing $21 trillion which must be periodically refinanced.