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Monday, August 31, 2015

It's Official: China Confirms It Has Begun Liquidating Treasuries, Warns Washington

On Tuesday evening, we asked what would happen if emerging markets joined China in dumping US Treasurys. For months we’ve documented the PBoC’s liquidation of its vast stack of US paper. Back in July for instance, we noted that China had dumped a record $143 billion in US Treasurys in three months via Belgium, leaving Goldman speechless for once.

We followed all of this up this week by noting that thanks to the new FX regime (which, in theory anyway, should have required less intervention), China haslikely sold somewhere on the order of $100 billion in US Treasurys in the past two weeks alone in open FX ops to steady the yuan. Put simply, as part of China's devaluation and subsequent attempts to contain said devaluation, China has been purging an epic amount of Treasurys.

But even as the cat was out of the bag for Zero Hedge readers and even as, to mix colorful escape metaphors, the genie has been out of the bottle since mid-August for China which, thanks to a steadfast refusal to just float the yuan and be done with it, will have to continue selling USTs by the hundreds of billions, the world at large was slow to wake up to what China’s FX interventions actually implied until Wednesday when two things happened: i) Bloomberg, citing fixed income desks in New York, noted "substantial selling pressure" in long-term USTs emanating from somebody in the "Far East", and ii) Bill Gross asked, in a tweet, if China was selling Treasurys.



Anonymous said...

Great news for the US,but most of us are too stupid to recognize the silver lining.We're being programmed to act upset about it as a nation to somewhat pacify China,and it's working.This is too much for the average American brain to handle.

Anonymous said...

You may want to rethink your position. China is the #1 holder of our debt.

Anonymous said...

Really?? Let's watch for 6 months and then you may or may not be so intelligent. Your are from Salisbury after all and haven't seen many millionaires if any.

Anonymous said...

"This is too much for the average American brain to handle." Too much for my little brain, 11:14. I view this as fairly neutral, but I don't understand how it is 'great news' as you say. Could you explain??

Anonymous said...

Well look at the stock market. It is so unstable that anyone sinking money into it now is insane.