It’s Official: China Confirms It Has Begun Liquidating Treasuries, Warns Washington
- China has activated the financial ‘nuclear’ option. The petrodollar is beating its last few heartbeats. Chinese selling of US treasuries will cause interest rates to rise. If it doesn’t, you know someone is buying behind the scenes on the orders of the US govt – FedRes. Who has the money to buy US$1+ trillion of treasuries the Chinese are holding? How will the US government finance its trillion dollar annual deficit? Collapse is imminent.
– - The war drums will get even louder. Watch for explosions, ‘accidents’ … in China.
– - It’s Official: China Confirms It Has Begun Liquidating Treasuries, Warns Washington
by Tyler Durden, www.zerohedge.com
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.
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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 has likely 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.
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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.
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Sure enough, on Thursday we got confirmation of what we’ve been detailing exhaustively for months. Here’s Bloomberg:
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