- Has China Been Quietly Selling US Treasurys: Here Is The Answer
by Tyler Durden, https://www.zerohedge.com/
Following today’s blockbuster, if still unconfirmed, report from Bloomberg that China is contemplating slowing or halting outright the purchase of US Treasurys in retaliation for an escalating trade confrontation with the US, which in turn led to a modest, if brief, selloff across the curve, some have asked if this is merely posturing or if China is actually ready to pull the plug.
This question breaks down into three distinct parts.
The first is whether China is ready to not only violate global capital markets, in the process certainly hurting itself as the largest offshore holder of US debt, but has the determination to proceed with this plan once it begins, even after the “BTFD” algos emerge. This was at the core of Steven Englander’s argument presented earlier today:
Can [China] afford for asset markets to blow this off completely and yet again ‘buy the dip’? For any threat to be credible, the impact probably has to last more than six hours. If there is a wave of market-close buying of assets, any future retaliation would have to be even stronger, and this would carry risks both to China and other countries.
Then, there is another, even more important question: is China ready to replace the US as the global bogeyman, i.e., the catalyst for what could be a global recession if the Chinese “retaliation” goes too far, to wit: