“The flows into bonds will dwarf the Fed’s retrenchment,” John Taft, chief executive officer of RBC Wealth Management U.S.A. in New York, said in a Sept. 17 interview with Tom Keene on Bloomberg Television’s “Surveillance.” Their increasing demand “will keep rates low,” Taft said.

The need for safer assets, including government bonds, will grow by as much as $5.7 trillion by 2020 as the Dodd-Frank Act in the U.S. and capital standards set by the Bank for International Settlements in Basel, Switzerland, require more top-graded debt as loss reserves, the Treasury Borrowing Advisory Committee said in a May 1 report.

Taper Postponed

Primary dealer holdings of Treasury securities declined to 1.09 percent of the market from 1.14 percent at the end of 2012. Dealers owned $126.8 billion as of Sept. 11, according to central bank data, the most since April, down from a record $145.7 billion in December. They have held an average of $92.3 billion in 2013, down from $93.1 billion last year.

Fed policy makers last week refrained from reducing the $85 billion pace of monthly bond buying, saying they needs more signs of lasting improvement in the economy.

“Conditions in the job market today are still far from what all of us would like to see,” Bernanke said at a Sept. 18 press conference in Washington after a two-day meeting of the Federal Open Market Committee. “The committee has concern that rapid tightening of financial conditions in recent months would have the effect of slowing growth.”

Republicans in the House of Representatives say they won’t fund the government past Oct. 1 or raise the debt limit by the middle of next month unless money to implement the Affordable Care Act is removed. Obama has said he won’t negotiate over the borrowing cap.

‘Full Faith’

“We’re not going to set up a situation where the full faith and credit of the United States is put on the table every year or every year and a half, and we go through some sort of terrifying financial brinksmanship because of some ideological arguments that people are having about some particular issue of the day,” Obama said Sept. 18 at a meeting of business executives in Washington.

The budget deficit through August was $755.3 billion, the smallest for the period since 2008. The Congressional Budget Office forecasts the shortfall will fall to about $700 billion by the Sept. 30 fiscal year-end from the $1.4 trillion record set in 2009.