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It’s just standard operations.

If foreign central banks don’t want to buy US treasuries, or have sold off their holdings of US treasuries, then they will simply spend the money elsewhere (e.g. purchase other dollar-denominated securities, in which case, somebody else gets the money and have to choose to spend it elsewhere, or to save in US treasuries).

If they choose to keep the money in a (US) bank, then the bank will simply use the reserves to buy US treasuries. In this case, instead of foreign central banks earning interests, it is a US bank that earns the interests lol.

Reserves are simply money that only banks have special access to in the central bank (in the US, this is the Federal Reserve). Its goal is to clear payments.

Let me give you a simplified example: say I transfer $1000 to your account (because I bought something from you), how does that $1000 disappear from my bank account and reappear in your bank account (assume in another bank)?

This is where reserves come in: my bank will debit $1000 from my account, and its reserves also simultaneously drop by $1000 (special account in the Fed). Your bank will then have an increase in $1000 in reserves, and a corresponding $1000 is credited into your bank account.

This is what allows millions and millions of bank transactions and payments to clear every single day, all around the world!

If you choose to withdraw this $1000 to buy US treasury bonds (effectively a savings account), then your bank account will drop by $1000, your bank’s reserve will also drop by $1000. In exchange, you get a bond certificate valued at $1000 with a certain % of interest until maturity.

Alternatively, if you choose to keep the $1000 sitting in your bank account, then your bank will simply take its $1000 in its reserve account in the Fed to buy US treasury bond. In this case, the bank will be the one earning interests, not you.

Remember, the national debt is simply the total amount of dollars the US federal government has spent that has not been taxed back yet. It is simply an accounting problem. No matter how you look at it, the amount of national debt will always equate to total US government deficits that haven’t been taxed back.

So all this talk about “stealth QE” is simply a misunderstanding of how central banking operations work. If bond investors don’t want to buy US treasuries, then what simply happens is they lose out on earning free money from the government. And if nobody wants to buy it (nobody wants free money), the Fed simply buys it through QE, which means nobody gets free money. The risk of US government defaulting on its bonds is exactly zero.

The Bank of England wrote a very nice explanation (complete with illustrations) on how such banking operations work, dispelling many of the myths often repeated about governments borrowing to spend.