Panel: Implications of declining treasury debt - International market implications of declining treasury debt

This article argues that international financial markets could take declining net U.S. Treasury debt in stride under normal circumstances. First, declining net U.S. government debt does not force U.S. Treasuries to be retired. Instead, Asia-Pacific governments have established or sustained government securities markets despite fiscal surpluses. Second, developments in the U.S. dollar money market show that fixed income markets can generate their own private benchmarks. Finally, the world's central banks are well along in shifting their portfolios away from U.S. Treasury to other instruments. Questions remain about market functioning under stress without the typhoon harbor that Treasury securities have provided.