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U.S. Treasury plans to unload debt

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Steve Chiotakis: Two day talks between the United States and China wrap up today.
The strategic and economic dialogue has been going as American officials try to reassure China that huge budget deficits and inflation won’t jeopardize the value of Chinese investments here. Key financial players in the Obama administration have been stressing to the Chinese that the United States does have a plan to bring the deficit down.

Of course, it’s because spending’s on the rise — lately, stimulus spending and bailing out Chrysler and GM and some big banks — is why the deficits keep going up. And the way down for those ballooning figures is by selling debt.
The U.S. Treasury wants to unload more than $200 billion of it. A new record. But who’s buying? Jill Barshay reports.

Jill Barshay: The market in U.S. government debt usually looks as smooth as a pond on a still day. But these big bond sales are making some big waves.

Lou Crandall is the chief economist at Wrightson ICAP. He says the splashes are attracting the hedge fund crowd.

Lou Crandall: The market’s a little less efficient and little more erratic than it normally is, and that creates trading opportunities. So we’re seeing different kinds of speculative investors looking at the Treasury market because it’s not as staid as it is during more normal times.

Crandall says these investors like the relatively high yields on some of this debt and the chance to take advantage of sharp price swings.

The biggest buyers remain foreign governments. Crandall expects the Chinese to keep snapping up Treasuries. And he’s seeing more interest from Russia, Hong Kong and India. He says throw in strong demand from sovereign wealth funds and there’s still plenty of interest in American debt.

In New York, I’m Jill Barshay for Marketplace.

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