This first week of October has seen U.S. interest rates soar to the 5% level on long-term Treasury bonds. That has made long-term Treasuries one of most attractive investment vehicles in the world, or even the most attractive.
One obvious result is that countries aiming to dedollarize their central-bank reserves would make an untimely decision move out of the dollar at this point. To avoid holding dollars in the form of US Treasury securities would mean holding foreign reserves denominated in a currency that is declining against the dollar. No other government is willing to make its currency so attractive to international investors (including central banks) by raising interest-rates so high.
At 5%, US bonds are the most secure and best investment around. There is a huge move into the dollar – and hence, pushing up its exchange rate against most other currencies. That has made it much more expensive for Global South countries to service their foreign debts denominated in dollars to the IMF, World Bank and private bondholders. If they try to pay these debts – which are now much more expensive in their own currencies – they will have to suffer austerity, and use their economic
— source michael-hudson.com | Michael Hudson | Oct 7, 2023