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00:00 Foreign investments in US Treasury bonds have reached new levels since December.
00:07 Japan, Britain and China are the countries that have the largest share of these bonds in December.
00:15 If we look at the numbers, we are talking about a rise in the second month in a row.
00:20 In November we saw a rise in December as well.
00:24 We have reached more than $8 trillion in the total shares of all foreign investments in Treasury bonds.
00:32 11% of the rise if we compare it to 2022.
00:37 So Japan is in the first place. We are talking about $1.2 trillion.
00:45 6% of the total foreign investments in these bonds.
00:51 China is in the first place with $816 billion.
00:55 We had a yearly decline of about 6% with China's reduction in its holdings on US Treasury bonds.
01:04 We have the United Kingdom, Luxembourg and Canada.
01:08 Why these increases that we have seen and the greater focus on Treasury bonds?
01:14 First, US Treasury bonds are safe havens.
01:18 They are considered one of the safest assets in the world.
01:21 When we look at the US economy even at the end of the year,
01:25 the US economy was more likely to be one of the few economies that avoided hard landing or economic collapse this year.
01:36 Now we are talking about no landing even for the US economy.
01:40 This gives more confidence in these bonds.
01:43 The other thing is the idea that at the end of last year,
01:48 the investor was betting that this year we will have a decrease in interest rates in the US.
01:56 This will reduce the returns of US bonds and therefore we will have capital gains or a rise in the prices of bonds.
02:04 That is why we saw a great focus on this kind of bonds.
02:10 So, there are many reasons related to the US economy.
02:15 The view of these assets as safe havens, which are the world's guarantees.
02:21 The other thing is the assumption that the US Federal Reserve will start reducing interest rates throughout this year.
02:27 Regardless of whether this decrease will start in the first half or the second half,
02:32 we will have a decrease.
02:34 The price was higher in December until the Federal Reserve started in March.
02:38 The price is higher in the second half of the year, but we will have a decrease in interest rates.
02:45 If we look at the short duration of the bonds,
02:52 the two years are the most sensitive to the monetary policy.
02:55 We notice that at the end of 2023, we saw the assumption that we will have a decrease in interest rates.
03:07 In fact, even if we look at the 10-year returns, which we will talk about in a little while,
03:12 or we will talk about the 30-year returns,
03:14 the 10-year returns reached 4.22% in the beginning of November.
03:20 November closed on a 3.86% decline.
03:25 This means that throughout November, the US Federal Reserve's 10-year returns declined by 36%.
03:32 Why? Because we have a higher price to reduce.
03:35 But what happened at the beginning of this year is that with strong economic data,
03:40 with the Federal Reserve meeting, the narrative for the markets changed,
03:45 and they expected more that the Federal Reserve would not be forced to start quickly by reducing interest rates,
03:52 and that it would be postponed to the May or June meeting.
03:54 This is what has returned and raised the interest rates of the US Treasury bonds,
03:59 specifically for the next two years.
04:00 We saw a rise in the year 2023 to a higher level in 17 years,
04:05 but in the last quarter of the last year, we saw a decline in the interest rates,
04:10 then it rose again at the beginning of this year,
04:13 and the idea is, in itself, related to when the Federal Reserve will start reducing interest rates.
04:19 The 30-year returns had also risen, but what happened is also similar to what happened for the past two years,
04:26 because the decline we saw in the fourth quarter, then the rise again at the beginning of this year,
04:31 also reflected on the 30-year returns, because every year from the two years to the 30 years,
04:38 it rose at the beginning of this year, with the price that we will have a delay in the process of reducing interest rates.
04:46 What about the Gulf states' reserves?
04:48 Because it is an issue that we have been observing a lot in the past period.
04:52 The Gulf states, specifically states like the Kingdom of Saudi Arabia, have a large liquidity in terms of their financial situation,
05:00 and therefore we noticed that in December we saw a higher level in three years in relation to its reserves on US Treasury bonds,
05:08 and it reached levels of $132 billion, rising from $112 billion in December 2022.
05:17 If we look at other countries, the United Arab Emirates, the ratio of change in its reserves in bonds rose by 9%,
05:27 and reached the highest level in three months.
05:29 As for Kuwait, we had a decrease because we reached $46.3 billion from $48.5 billion in December 2022.
05:39 It is worth mentioning that according to a report by the US Treasury Department, the cash flows that entered the US Treasuries reached $33.8 billion.
05:52 It is interesting how these cash flows are compared to the cash flows that entered the stock markets, which reached $79.7 billion,
06:01 and of course these are the figures related to December.