Thursday, October 27, 2016

As China Liquidates U.S. Treasuries, 
It Is "Gobbling" Up 
Japanese Government Bonds
The Worldwide Currency War Escalates
"Is China dumping all of its foreign reserve holdings proportionately, or is Beijing strategically offloading its US paper, for financial, political reasons or otherwise, as it buys other foreign government bonds. The answer, at least according to the Nikkei, is the latter .. A simple explanation for the shift is that the People's Bank of China has been reducing its holdings of U.S. Treasurys in anticipation of higher U.S. interest rates and shifting some of its money to JGBs, where higher rates - courtesy of 250% in debt/GDP - are largely guaranteed to never arrive. But more importantly, and this could explain the perplexing recent strength in the Yuan, this trend may be a reason behind the yen's appreciation in foreign exchange markets in recent months .. China's selling of US paper is accelerating, which also suggests that just as China has been a factor pushing the Yuan higher, the dollar has been pressured lower by the ongoing Chinese liquidation. One wonders how much higher the USD will jump if and when China decides to halt its selling of U.S. paper, and how much lower the Yuan will then tumble in response, leading to even faster capital outflows from China."
link here to the commentary

No comments: