Posted on 05/26/2019 9:49:14 PM PDT by vannrox
Why you should care
Beijing’s recent sales of securities are triggering concerns that it might dump U.S. securities for leverage in the ongoing spat with Washington.
It was an unnerving piece of data for investors two weeks back, buried halfway down an esoteric spreadsheet released by the U.S. government that tracks how many Treasuries foreign investors buy and sell. China, the largest foreign creditor to the U.S. government with total Treasury holdings in excess of $1.2 trillion, sold $20 billion of securities with a maturity exceeding one year in March, according to U.S. government data. The sales amounted to China’s largest retreat from the market in more than two years.
The move came shortly before tensions over trade between Beijing and Washington heated up again, with the U.S. slapping additional tariffs on the country’s imports, and Chinese officials retaliating with measures of their own. What’s more, the sales could not be explained away by the typical ebb and flow of China’s Treasury holdings that result from managing its large reserves to keep the currency stable.
(Excerpt) Read more at ozy.com ...
Just pointing out, this is posted by a China-resident FReeper.
:)
China has to sell it’s T bills to support the Yuan.
Used to be they only benefited from a low Yuan, but no longer.
There is not really a concern with any country “dumping” bonds.
China would take an increasing loss the more they tried to get rid of, and the US can simply raise it’s provided interest rate a bit through the ordeal to continue to sell new bonds.
Then the interest rates would go down, once parity was again found.
China can’t outdo what the Fed is already doing with quantitative unwinding. The Fed is dumping Treasuries at a pace of half a trillion per year.
US Dollars for Yaun.
Yawning
I don’t understand the concern. Whoever holds the debt, the US is obligated to pay the same amount.
I wish the natering nabobs of negativity who have lead this nation into decline would finally shut up, because they have been completely wrong for decades.
The concern is that the Chicoms would be willing to sell their debt at a loss, thus driving down US bonds.
How funny is that!
China, the largest foreign creditor to the U.S. government with total Treasury holdings in excess of $1.2 trillion, sold $20 billion of securities with a maturity exceeding one year in March, according to U.S. government data.
Oh, no, we're doooooomed. Thanks vannrox.
“The concern is that the Chicoms would be willing to sell their debt at a loss, thus driving down US bonds.”
Thanks for the response. Why would they do that, though?
That would drive up the cost of US government interest rates. Why buy US bonds at 4 percent when you can buy US bonds held by China at 5 percent? China takes a hit on the bonds, but it forces the US to raise interest rates.
“Why buy US bonds at 4 percent when you can buy US bonds held by China at 5 percent? “
But wouldn’t the buyer of US bonds with a 5% interest rate have to pay a premium for them? Sorry, I should know this. I never took the time to figure out the market for held debt obligations.
That’s where the Chicoms lose money. They have to sell bonds at a value less than they would get if they kept them. That would, in their thinking, force the US to raise interest rates on our new debt, which would hurt our economy.
They might be right, but they would have to sell a big chunk of that trillion dollar bond debt, at a loss, to do that. I don’t think the wobbly Chicom economy can do that without a big economic seizure.
Yeah. I don’t think screwing the US is sufficient motivation for taking such action, especially when their economy seems to be stagnating.
I wish the natering nabobs of negativity who have lead this nation into decline would finally shut up, because they have been completely wrong for decades.
Amen to that!
The way I see things is that for every item of “fear” or “distress” we should take it as a positive opportunity. It’s all in how we play the cards we are dealt.
The interest rate on the 10 Year Treasury has been dropping for seven consecutive months.
The current rate is 2.32%.
That is just 1% higher than the all time low of 1.37%.
If there was going to be some kind of financial crisis involving the US Dollar or USA sovereign debt, the interest rate would be moving sharply in the other direction.
$1.2 trillion in securities?
Good luck finding enough buyers to cause any damage ...
What a great song in your tagline!
This might compound with tariffs to increase Chinese good prices.
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