Oil Brings Americans Closer to OPEC Debtor Dependence

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from Bloomberg:



Oil Brings Americans Closer to OPEC Debtor Dependence (Update3)

By Daniel Kruger

July 14 (Bloomberg) -- Petroleum-exporting nations from Saudi Arabia to Russia are not only charging Americans record high prices for fuel, they are also poised to become the biggest creditor to the U.S. government.

Holdings of Treasuries by oil producers and institutions such as U.K. banks that are proxies for Middle East nations rose 44 percent this year to $510.8 billion through April, four times faster than the rest of the world, according to the Treasury Department's most recent data. At the current pace, they'll surpass Japan, which holds $592.2 billion, as the largest owner this month.

While the investment of so-called petrodollars into government debt is helping to temper a rise in borrowing costs as the U.S. finances a record budget deficit, it highlights America's dependence on foreign money. New York's Chrysler Building was bought last week by Middle East investors.

``We should be very happy that they're buying U.S. Treasuries because they're keeping interest rates low, and that's a positive for bond investors,'' said Gary Pollack, who helps oversee $12 billion as head of fixed-income trading at Deutsche Bank AG's Private Wealth Management unit in New York. ``Whether there's geopolitical risk is something else.''

The benchmark 10-year note's yield fell 10 basis points, or 0.10 percentage point, to 3.86 percent, according to BGCantor Market Data. The price of the 3.875 percent security due in May 2018 rose 26/32, or $8.13 per $1,000 face amount, to 100 4/32. ......(more)

The complete piece is at: http://www.bloomberg.com/apps/news?pid=20601103&sid=aw6lIs2RpX84&refer=us