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Who buys (still) public debt?

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In 2010, 61% of French medium and long-term issues were subscribed by central banks.

In 2009 and 2010, governments issued $ 4.7 trillion in additional loans, mainly purchased by emerging countries.

Over the past two years, the enormous financial needs to consolidate payday loans, linked to the explosion of government fiscal deficits have been able to be financed without causing a sharp rise in interest rates – even if, individually, Greece or Ireland have experienced serious crises. How can one explain why, in two years, an additional $ 4,700 billion (€ 3,475 billion) – compared to the level of net debt issuance in 2008 – could thus be absorbed? In fact, there is something. And even several.

First, the accumulation of foreign exchange reserves in China and the oil-producing countries were reinvested by their central banks in Western government securities. In the case of France, Philippe Mills, Chief Executive Officer of Agence France Trésor (AFT), lifted a corner of the veil during a presentation to investment managers of mutual institutions organized by the management company Egamo, subsidiary of MGEN, January 26, where Le Monde was present.

The figure was hitherto jealously guarded and unpublished: 61% of net issues of French debt maturities of more than two years were absorbed by central banks in 2010, and 45% in 2009.

The US Federal Reserve (Fed) has also led – like the Bank of England – a quantitative easing policy of creating money to buy private and public debt.

The Fed’s balance sheet is expected to reach $ 3 trillion in June 2011, a tripling in two and a half years. The European Central Bank (ECB) made few direct purchases but indirectly helped banks to gorge themselves on securities by providing liquidity and accepting lower-rated government securities as a counterpart.

Then, the government played its cap of financial regulators, imposing prudential rules forcing institutional investors to hold more government bonds.

But these operations are not without consequences on global monetary imbalances, the subject of the meeting of finance ministers and governors of central banks of the G20, 18-19 February in Paris.

At the London G20 summit in April 2009, the major developed and emerging powers agreed to cushion the shock of the crisis. A “concerted budgetary expansion” of $ 5 trillion over two years had been authorized, this sum of new deficits having been calculated in relation to the “good” the year 2007.

According to estimates by the rating agency Standard & Poor’s and the US bank JP Morgan, the overall slippage was slightly higher: $ 2.6 trillion in additional government issues in 2009 and $ 2.7 trillion in 2010 compared to 2007. The buyers were at the rendezvous: the central banks have placed their reserves and absorbed the offer, like the institutional ones who increased their purchases of securities.

In France, as Raoul Salomon, treasury securities specialist at Barclays Capital, explains, “banks have become significant players, particularly in the market for securities maturing from three to seven years”. “The new Basel III banking standards force them to hold a cash buffer, and Solvency II insurers are forced to buy bonds rather than shares. changes in financial regulation and the need for funding of states, “he analyzes.