By Daniel Kruger
While the U.S. economy has yet to return to rates of growth seen before the financial crisis, the U.S. bond market has been a magnet for global savings. Treasurys have been a repository for central banks looking to bolster their financial reserves and for private investors seeking to preserve capital.
Since 2014, central banks in Europe and Asia have stepped up their efforts to boost economic growth and spur investment by driving interest rates below zero. That has led to an infusion of cash into the U.S. corporate bond market, which offers relatively high interest with low default rates.
While central banks have slowed their accumulation of Treasurys, improvements in the global economy could reverse that trend.
After initial spasms of concern about the health of U.S. corporate credit during the recession, investors -- abetted by trillions of dollars of Fed bond purchases of Treasurys and mortgage-backed securities -- piled into company bonds.
Many foreign investors came to hold Treasury bonds because of a trade surplus with the U.S. For China, owning Treasurys has also often been a way to prevent its currency from appreciating.