China sells more US T-bonds

[jetdawgg]

By Shangguan Zhoudong (chinadaily.com.cn)
Updated: 2007-06-19 15:23


China sold more US treasury bonds in April than any time in at least seven years, a signal that the nation may be diversifying the world's largest foreign-exchange reserves, Shanghai Securities News reported today.


Statistics from the US Treasury Department show that China sold a net US$5.8 billion of T-bonds, the first drop in holdings since October 2005. Japan remains the largest holder of US T-bonds, with its holdings reaching US$614.8 billion in April, according to the statistics.

China remained the second-largest holder of US T-bonds, as its stake fell to US$414.0 billion in April from US$419.8 billion in March this year. The United States had US$4.4 trillion of tradable bonds in April.

As an effort to diversify its forex investment channels, China also established a new specialized foreign exchange investment company named the State Investment Company to focus on investing in high-return bonds, stock markets, real estate and private equities. Analysts estimate the company may start with US$200 billion in capital.

"China's newly-added forex reserves through trade surplus are enough to make high-yield investments, and China may not and need not to use the US$1.2 trillion forex reserves," said Sun Mingchun, an economist with Lehman Brothers. "China won't sell a large amount of US T-bonds even if it wants to sell."

Marc Chandler, Chief Currency Strategist at Brown Brothers Harriman & Co, said that there's no clear sign Chinese investors are going to dump US T-bonds, noting that Chinese officials have said they have no intention of doing anything that would devalue their holdings.
Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke have repeatedly played down concern of a sell-off in T-bond holdings by foreign investors. Paulson noted again this week that China's holdings amount to about one day's worth of trading in the T-bond market.

Greg Anderson, director of currency strategy at ABN Amro Bank NV, said he was unconcerned about the decline in China's holdings of US T-bonds because the country is still buying US assets, providing support for the dollar.


Statistics from the Treasury Department also show that global investors in April this year sold a net US$28.2 billion of bonds, with their holdings down to US$2.17 trillion from US$2.19 trillion at the end of March.
To attract more investments in US dollar assets, Treasury deputy secretary Robert Kimmitt plans to lobby China and Russia to keep investing in the US on his trips to Moscow and Beijing next week. He said he plans a similar message on upcoming visits to Japan, South Korea and the Middle East.

http://www.chinadaily.com.cn/bizchin...ent_897708.htm

[10thzodiac]

I know foreign creditors (China & Japan) holding US debt could cause interest rates to go way up if they sell enough US Treasuries forcing the Fed to make interest rates attractively higher for foreign lenders. Also the skilled job market is tight, causing employers to raise wages which is inflationary, cured usually by the Fed raising interest rates.

My question to you and others here, where do you see interest rates going ?

Stagflation anybody ?

[greensideout]

Stagflation? It had the retired dancing in the streets with 15% CD's on their IRA's back in the '80's. Will it happen again? Who knows?

[jetdawgg]

10Z if the democrats gain the WH interest rates will go up. This admin has printed too many dollars allowing it to devalue to the point where it is now on par with the CA dollar.

Bernanke will be tested over the next year as the quest for power (WH race) comes into focus. The USD is in a free fall and raising interest rates will be one tool to use in the fight to put valuation back into it.

[ivalis]

dawg, the scenario you described exists reguardless of who wins the white house next election.

[jetdawgg]

dawg, the scenario you described exists reguardless of who wins the white house next election.

I am hoping that a deficit cutting republican would get into play. The democrats have shown me thier card with the 'troop surge' bill being passed after they were voted in overwhelmingly to 'change the course'

[ivalis]

"deficit cutting republican", baa haa

[10thzodiac]

A triple whammy !

1. Employers can't find qualified employees now causing wages to go up.

2. Everyday consumer items are up.

3. Now, China dumping US treasuries on the open market.

The Fed is probably on political hold on interest rates, the Republicans don't need anymore election year political problems with higher interest rates i.e. unemployment, etc.

Behind the curve, anybody ?

BTW, is gasoline going lower for September and/or the White House ? Maybe its a wing-nut coincidence

[jetdawgg]

The (Anti-American) immigration bill that was tossed recently also prevented H1-B Visa workers to enter the USA. Bill Gates wanted an unlimited amount.

Ted Kennedy voted to install 400,000 more of them up from 65,000 today.

Inflation is looming and lurking. With more and more countries turning away from the USD this could be real trouble soon, if it is not already. Good to know that there are Marines up on this issue.

[10thzodiac]

They're predicting $5 gallon milk !

[jetdawgg]

Sh!t 10Z that is not a stretch. It is 4+ in the ATL already

[10thzodiac]

Sh!t 10Z that is not a stretch. It is 4+ in the ATL already

Most milk in Chicago runs between $ 2-3 approximately. At Tony's (non-union) a mile away, it is $1.99.

I won't miss milk that much when it goes to $5, I drink skim, so switching to water entirely won't be a big deal fof me.

2003 in Kauai, HI I saw milk for $5

[drumcorpssnare]

(yawn)

[10thzodiac]

(yawn)

I guess they didn't teach the three "B's" in the band... must be a FMF thing.

[yellowwing]

China sold a net US$ 5.8 billion of T-bonds...out of US $4.4 trillion of tradable bonds in April. Just a drop in the bucket. No worries.