The American debt is largely in foreign hands. Almost a third of treasury bills are owned outside the country, mainly in Asia. But Switzerland is also one of the 10 largest creditors in the United States
In theory, Switzerland has an asset in its round. It holds $ 300 billion in American debt and is one of the 10 largest creditors in Washington. Could it use it in trade negotiations with Washington, to avoid too high customs duties?
Debt can quite be a negotiation tool between Switzerland and the United States
As François Savary, strategist and founder of Genvil, underlines “in the redefinition of world relations by the United States, it is not just trade. To obtain commercial concessions from the United States, there are a set of defense-related measures or linked to the American debt which are integrated into the global plan.” For him, debt “can therefore be completely a negotiation tool not only between Switzerland and the United States, but with other countries”.
Japan and China, the first creditors of the United States
At the top of the Creditors of the United States, Japan holds 1000 billion, followed by China. In total, about a third of the American debt, which exceeds 36,000 billion, are foreign hands. A brutal sale of these treasury bills could destabilize this market and endanger the American economy.
Because when investors sell, as we saw last week, yields increase. The latter define the interest rates of state loans but also mortgages or business loans. An increase in rates is therefore harmful for everyone.
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Do not touch the independence of the Swiss National Bank
However, in practice, everything is more complicated, as Daniel Varela, chief of investments of the Piguet Galland bank explains: “The Swiss government cannot unilaterally decide to use its power to sell American treasury bills”. We should ask the National Bank, which holds a large part of this debt, to sell, which is not compatible with its independence.
The Swiss government cannot unilaterally decide to use its power to sell American treasury bills
And no one wants to question it, because, continues Daniel Varela, “this can shake one of the foundations that has made Switzerland’s prosperity in recent years, not to say in recent decades”.
Convincing investors to sell would be complicated
It will also be hardly easier to convince other investors: “I can hardly see the Federal Council sending the message that you have to sell the American treasury bills. And even if it would do it: would it be applied by private and institutional customers? I doubt it a lot”.
Laureline Renaud Chatelain, bond expert at Pictet Wealth Management, is of the same opinion: “It would be very surprising to see the BNS interfere in political affairs. And as it is independent, the Federal Council does not have the authority necessary to ask it to liquidate its positions”.
Only China could use this exchange currency
The only country that can really use this “exchange currency: China. They have a lot, about 760 billion, in the majority in institutions under government control,” concluded the expert.
Mathilde flour
