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Putin Calls U.S. ‘Parasite’ as Russia Gorges on Its Debt

 
gebahie

User ID: 1455754
United States
08/19/2011 11:37 AM

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Putin Calls U.S. ‘Parasite’ as Russia Gorges on Its Debt
For Russian Prime Minister Vladimir Putin, the U.S. is a “parasite” because its rising debt weighs on the global economy. For his government, the same debt is the safest possible investment.
Russia, the worldÂ’s largest energy producer, has boosted its holdings of U.S. debt by more than 1,600 percent since September 2006, according to U.S. Treasury Department data. Russia used surging commodity prices to build the worldÂ’s third- largest reserves pile, boosted in part by return on Treasuries.
Putin, 58, who oversaw the largest buildup of U.S. debt holdings in RussiaÂ’s history as president from 2000 to 2008, may return to the post after elections next year. The country is now one of the worldÂ’s 10 largest holders of the securities with $110 billion at the end of June, about 70 percent more than when Putin left the Kremlin.
“They are sending out a message” largely for domestic consumption, Edwin Gutierrez, who helps manage about $7 billion in emerging-market debt at Aberdeen Asset Management in London, said in a phone interview on Aug. 17. “It’s ironic that these voices of complaint come as they experience massive capital appreciation.”
RussiaÂ’s 2020 dollar bonds returned 9.5 percent this year compared with 12.7 percent for similar-maturity U.S. debt. This month, the Russian dollar bonds advanced 0.7 percent against a 5.6 percent increase for U.S. bonds. Ten-year Treasury yields dropped below two percent for the first time yesterday, touching a record-low 1.9735 percent before rising again.
U.S. Bonds Outperform
The yield on 10-year U.S. Treasuries has fallen 2.77 percentage points, or 277 basis points, over the past five years, according to data compiled by Bloomberg. The yield on U.S. Treasuries due in 2016 has fallen 110 basis points this year, almost double the 66 basis-point drop for comparable German bunds.
The American bond market has outperformed world bond indexes since Standard & PoorÂ’s downgraded the U.S. credit rating on Aug. 5, showing market concern that the nation may default hasnÂ’t risen. MoodyÂ’s Investors Service and Fitch Ratings, the two next biggest rating companies, affirmed their AAA ratings on the U.S.
S&PÂ’s first downgrade of U.S. debt to AA+ sparked a global selloff in equities as investors sought shelter in traditional havens like Treasuries. The Securities and Exchange Commission is scrutinizing the decision.
‘Beyond Its Means’
The U.S. “is living beyond its means and shifting part of the weight of its problems onto the world economy, acting to some extent as a parasite on the global economy and its dollar monopoly position,” Putin told a youth camp outside Moscow on Aug. 1 in response to questions about the risk of an American default.
After the S&P downgrade, Russia joined the largest holders of U.S. debt in rushing to voice support by pledging to retain their Treasuries holdings.
Russia doesn’t expect “any alternative whatsoever” to American sovereign debt in its holdings for the next five years, Deputy Finance Minister Sergei Storchak said in a telephone interview on Aug. 16.
“The U.S. debt market is still the most liquid, dependable and safe,” Storchak said. “There’s absolutely no reason for Russia to reconsider its position on U.S. securities or to change its investment strategy now. And not just now -- for some time to come.”

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[link to www.bloomberg.com]

Last Edited by Account Deleted by User on 08/19/2011 11:40 AM
GenieRoze

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08/19/2011 02:29 PM
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Re: Putin Calls U.S. ‘Parasite’ as Russia Gorges on Its Debt
What a smack in the face.





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