This Doesn't Sound Good

[Annie]

Foreigners cut Treasury stakes; rates could rise - Yahoo! Finance

Foreigners cut Treasury stakes; rates could rise
Foreign demand for short-term Treasurys tumbles, led by China; chance of higher rates looms

Companies:Fannie MaeFreddie Mac
By Martin Crutsinger and Bernard Condon, AP Business Writers , On Tuesday February 16, 2010, 5:12 pm EST
WASHINGTON (AP) -- A record drop in foreign holdings of U.S. Treasury bills in December sent a reminder that the government might have to pay higher interest rates on its debt to continue to attract investors.

China reduced its stake and lost the position it's held for more than a year as the largest foreign holder of Treasury debt. Japan retook the top spot as it boosted its Treasury holdings.

The Treasury Department said foreign holdings of U.S. Treasury bills fell by a record $53 billion in December. That topped the previous record drop of $44.5 billion in April 2009.

Private analysts, though, were split over the significance of the decline. Some doubted that the drop in foreign holdings of short-term Treasuries signified growing unease about holding U.S. debt. They noted that net purchases of longer-term Treasury debt rose in December by $70 billion.

But other economists saw the decline as a warning signal. They fear that foreigners, especially the Chinese, have begun to worry about record-high U.S. budget deficits and are looking to diversify their holdings.

A sustained drop in foreign demand for dollar-denominated assets could lead to higher U.S. interest rates and falling stock prices. Those trends could threaten the U.S. recovery. But economists said they see no such evidence yet....

 

[Baruch Menachem]

China has problems of its own.

And Fannie and Freddie are toxic.

Nuebarth has been talking about this for a while.

And there is just the problem of too much debt.

As for what is going on in the rest of the world.... The Euro is shattering. It may collapse if it cant get its act together.

So where else are they going to put their money? Gold is too volatile and in too short of supply.


China might find some other haven, but I dont see it happening soon.

 

[Samson]

We need a serious war.....the Cold War, War on Drugs, War on Terror simply haven't done the trick.

 

[Neubarth]

We need a serious war.....the Cold War, War on Drugs, War on Terror simply haven't done the trick.

Wars are expensive but do find jobs for people, usually in the military or the Military Industrial Complex that Eisenhower warned us about. As it is the Military Industrial Complex has had too much money handed to it in the past nine years.

We need to find new ways to put people back to work. We can not compete with China for cheap manhours, so perhaps we should stop allowing them to compete with us. I am not a fan of this program that both parties signed on to endorsing global free trade. It only works when it takes jobs away from America and gives them to foreign countries. We need to put a stop to that if we are going to put our people to work. We have a large low IQ labor force and we need to provide jobs for them. Failure to do so will cement in place a welfare state for most of the low IQ people in this nation.

 

[Neubarth]

China has problems of its own.

And Fannie and Freddie are toxic.

Nuebarth has been talking about this for a while.

And there is just the problem of too much debt.

As for what is going on in the rest of the world.... The Euro is shattering. It may collapse if it cant get its act together.

So where else are they going to put their money? Gold is too volatile and in too short of supply.


China might find some other haven, but I dont see it happening soon.

From the news story that I read, China sold less than 40 Billion in American Bonds. I was surprized that the amount was so little. Ya gotta admit that they did it at the right time since the dollar had been going up in value against the Euro. If they switched their bonds to Euros, they can shift back to the dollar when it hits bottom and ride it up again. The Chinese do have some damn smart investment people. Smarter than Cramer.

 

[Samson]

We need a serious war.....the Cold War, War on Drugs, War on Terror simply haven't done the trick.

Wars are expensive but do find jobs for people, usually in the military or the Military Industrial Complex that Eisenhower warned us about. As it is the Military Industrial Complex has had too much money handed to it in the past nine years. .

Exactly.

The Military Industrial Complex owes us.

All these half-assed wars. WTF have we invested in?

Sure, there's the "death and maiming downside," but you can't make an omlett without breaking a few eggs.

 

[gonegolfin]

Foreigners cut Treasury stakes; rates could rise - Yahoo! Finance

Foreigners cut Treasury stakes; rates could rise
Foreign demand for short-term Treasurys tumbles, led by China; chance of higher rates looms

With respect to China ... China's purchases are likely well understated. International money flow experts (such as Brad Setser) have noted in the past that middle eastern (Oil Exporters) and certain countries in Asia (most notably China) funnel some of their purchases through the London subsidiaries of US primary dealers (China also likes to route through Hong Kong). So, with respect to the Treasury data, these purchases are reported as UK purchases. This has happened several times in the past (including late Summer '09) with the numbers revised at a later time.

If you notice, UK's official purchases lept an amazing $72 billion in the two months ending 2009 (from $230 billion to $302 billion) ... representative of the time period addressed by the article. In the past this has been China stealthily purchasing treasuries. The Chinese central bank likes to hide their treasury purchases ... the reason being that such purchases are evidence that the Chinese are manipulating their currency (vs. the Dollar). The Chinese always want to understate the amount of treasuries they are purchasing. If they can do this (and get away with it), the cries of currency manipulation from the US (especially politicians) are more muted than they otherwise would be.

Brian

 

[MIPS]

Foreigners cut Treasury stakes; rates could rise - Yahoo! Finance

Foreigners cut Treasury stakes; rates could rise
Foreign demand for short-term Treasurys tumbles, led by China; chance of higher rates looms

Companies:Fannie MaeFreddie Mac
By Martin Crutsinger and Bernard Condon, AP Business Writers , On Tuesday February 16, 2010, 5:12 pm EST
WASHINGTON (AP) -- A record drop in foreign holdings of U.S. Treasury bills in December sent a reminder that the government might have to pay higher interest rates on its debt to continue to attract investors.

China reduced its stake and lost the position it's held for more than a year as the largest foreign holder of Treasury debt. Japan retook the top spot as it boosted its Treasury holdings.

The Treasury Department said foreign holdings of U.S. Treasury bills fell by a record $53 billion in December. That topped the previous record drop of $44.5 billion in April 2009.

Private analysts, though, were split over the significance of the decline. Some doubted that the drop in foreign holdings of short-term Treasuries signified growing unease about holding U.S. debt. They noted that net purchases of longer-term Treasury debt rose in December by $70 billion.

But other economists saw the decline as a warning signal. They fear that foreigners, especially the Chinese, have begun to worry about record-high U.S. budget deficits and are looking to diversify their holdings.

A sustained drop in foreign demand for dollar-denominated assets could lead to higher U.S. interest rates and falling stock prices. Those trends could threaten the U.S. recovery. But economists said they see no such evidence yet....

This is what is commonly known as a shot across the bow and is no surprise to those of us that have been warning this was coming for a long time. Do we think we can continue with our reckless spending and monetary inflation while our creditors just continue to lend us money by the boatload? what sort of fantasy land are we living in? This is just the first step, if Washington doesn't start getting it's ducks lined up the hammer is going to drop and we'll all be sorry.

 

[Neubarth]

This is what is commonly known as a shot across the bow and is no surprise to those of us that have been warning this was coming for a long time. Do we think we can continue with our reckless spending and monetary inflation while our creditors just continue to lend us money by the boatload? what sort of fantasy land are we living in? This is just the first step, if Washington doesn't start getting it's ducks lined up the hammer is going to drop and we'll all be sorry.

I dis agree with you. I think it is just the Chinese taking advantage of the Dollar Rise, knowing that it will fall against the Euro if the Europeans can get their house in order. That is being done, so the Chinese sold a small portion of their US debt to convert it to European debt. Smart, very smart. As previously stated, I wondered why so little was actually traded. A previous poster said that China can hide their sales. If so, then maybe they sold more and prover themselves to be even more smart than I first thought.

The Chinese look right now to have their shit together. Good for them. Now, what are we going to do to put people back to work. I favor an Economic Co Prosperity Zone in North America with the Chinese excluded. We certainly have the laborers, but are not using them on our continent.

 

[gonegolfin]

I dis agree with you. I think it is just the Chinese taking advantage of the Dollar Rise, knowing that it will fall against the Euro if the Europeans can get their house in order. That is being done, so the Chinese sold a small portion of their US debt to convert it to European debt. Smart, very smart. As previously stated, I wondered why so little was actually traded. A previous poster said that China can hide their sales. If so, then maybe they sold more and prover themselves to be even more smart than I first thought.

No, that is not what I said ... you have it backwards. The Chinese purchases are likely well understated, as they sometimes route their activity through the UK (and at times HK). UK purchases were up dramatically at the end of the year. This has been a repeatable pattern this decade.

http://www.usmessageboard.com/2016442-post7.html

Brian

 

[uscitizen]

I am sure that Wall Street types can still profit off of the rest of our problems.

 

[gonegolfin]

This is what is commonly known as a shot across the bow and is no surprise to those of us that have been warning this was coming for a long time. Do we think we can continue with our reckless spending and monetary inflation while our creditors just continue to lend us money by the boatload? what sort of fantasy land are we living in?

You are missing the other side of the story and why creditors (especially China and Japan) are willing to lend to us. Do you know the mechanics of why China (official institutions) lends to the US? That is, why does the Chinese Central Bank have all of these US Dollars they are investing in US treasuries (and not long ago, US treasuries, Agency debt, and Agency MBSs)?

The answer is the clue to why the Chinese are funneling purchases of treasuries through the UK based primary dealers (and at times HK) ... and why the Chinese purchases of treasuries are at times well understated in the TIC reports.

Brian