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Once again, the prophets of doom were wrong.
Topic Started: 17 Oct 2015, 07:22 PM (1,431 Views)
Black Panther
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What China selling US Treasurys really means

If someone would have suggested, as recently as six months ago, that China would sell over $150 billion of U.S Treasurys in a handful of months, analysts would have warned of an impending disaster in the U.S. bond markets.

Forecasters would have said that the dollar would crash, rates would skyrocket and stocks would plunge as America's reliance on the kindness of strangers to finance its budget deficits had finally exhausted their generosity.


Well, guess what? China did just that and other global central banks have slashed their holdings of U.S. Treasurys with barely a ripple in the multi-trillion dollar bond market.

Once again, the prophets of doom were wrong. And again, wrong for all the wrong reasons.

First, the sale of U.S. Treasurys by the Chinese was far from a repudiation of America's fiscal policies. It was an act of desperation to cover capital flight that has plagued China, and other emerging-market economies in the last several months.

It has been reported that Chinese nationals, despite restrictions, have moved a half trillion dollars abroad … into the relative safety of U.S. real estate, among other offshore assets, as the Chinese market melted down. So, too, in other emerging-market nations.


Chinese foreign-exchange reserves have also fallen markedly as Beijing spent quite liberally trying to prop up said market, forcing the government to raise cash to replenish their coffers.

As NYSE floor trader Art Cashin has long said, "When you can't sell what you own, you sell what you can." With the U.S. Treasury market among the most liquid and deepest markets in the world, China's bond sales were easily absorbed.

The other reason there was scant impact on U.S. interest rates is the desire, and/or requirement, among many financial institutions to hold high quality, long-dated bonds.

With capital requirements rising for banks, brokers and insurers, U.S. Treasurys fit the bill quite nicely as Tier One capital. In addition, while rates are low, U.S. Treasurys have generally higher yields than other sovereign bonds, not to mention infinitely less credit risk.

The higher yields in the U.S. are also reflective of relative economic strength … witness negative interest rates in some parts of Europe and near-zero returns on Japanese bonds of similar maturities.

In other words, there were willing buyers for whatever China, Middle Eastern and emerging-market nations offered for sale.

All of this happening AFTER the Federal Reserve ended its bond-buying programs that, over the last several years, were designed to keep long rates low and stimulate domestic growth.

Many of the prophets of doom also said that the dumping of U.S. debt would come as America's budget deficits continued to rise from the record $1.4 trillion print back in 2009. Instead, deficits have been slashed by more than 50 percent and are now less than three percent of U.S. GDP.

In other words, the world is not choking on U.S. debt, instead, there is a relative shortage of it.

As always, it is easy to predict the end of the world, as we saw on the night of the "blood moon," and again on Sept. 23 (another date with supposed apocalyptic significance). But the end of days never arrived.

The doomsday clock may still be ticking, but the time bomb is more likely to go off outside the U.S. while bonds remain the world's safest and most resilient economic bomb shelter.

https://au.finance.yahoo.com/news/china-selling-us-treasurys-really-110000250.html
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Foxy
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Zero is coming...

Black Panther
17 Oct 2015, 07:22 PM
What China selling US Treasurys really means

If someone would have suggested, as recently as six months ago, that China would sell over $150 billion of U.S Treasurys in a handful of months, analysts would have warned of an impending disaster in the U.S. bond markets.

Forecasters would have said that the dollar would crash, rates would skyrocket and stocks would plunge as America's reliance on the kindness of strangers to finance its budget deficits had finally exhausted their generosity.


Well, guess what? China did just that and other global central banks have slashed their holdings of U.S. Treasurys with barely a ripple in the multi-trillion dollar bond market.

Once again, the prophets of doom were wrong. And again, wrong for all the wrong reasons.

First, the sale of U.S. Treasurys by the Chinese was far from a repudiation of America's fiscal policies. It was an act of desperation to cover capital flight that has plagued China, and other emerging-market economies in the last several months.

It has been reported that Chinese nationals, despite restrictions, have moved a half trillion dollars abroad … into the relative safety of U.S. real estate, among other offshore assets, as the Chinese market melted down. So, too, in other emerging-market nations.


Chinese foreign-exchange reserves have also fallen markedly as Beijing spent quite liberally trying to prop up said market, forcing the government to raise cash to replenish their coffers.

As NYSE floor trader Art Cashin has long said, "When you can't sell what you own, you sell what you can." With the U.S. Treasury market among the most liquid and deepest markets in the world, China's bond sales were easily absorbed.

The other reason there was scant impact on U.S. interest rates is the desire, and/or requirement, among many financial institutions to hold high quality, long-dated bonds.

With capital requirements rising for banks, brokers and insurers, U.S. Treasurys fit the bill quite nicely as Tier One capital. In addition, while rates are low, U.S. Treasurys have generally higher yields than other sovereign bonds, not to mention infinitely less credit risk.

The higher yields in the U.S. are also reflective of relative economic strength … witness negative interest rates in some parts of Europe and near-zero returns on Japanese bonds of similar maturities.

In other words, there were willing buyers for whatever China, Middle Eastern and emerging-market nations offered for sale.

All of this happening AFTER the Federal Reserve ended its bond-buying programs that, over the last several years, were designed to keep long rates low and stimulate domestic growth.

Many of the prophets of doom also said that the dumping of U.S. debt would come as America's budget deficits continued to rise from the record $1.4 trillion print back in 2009. Instead, deficits have been slashed by more than 50 percent and are now less than three percent of U.S. GDP.

In other words, the world is not choking on U.S. debt, instead, there is a relative shortage of it.

As always, it is easy to predict the end of the world, as we saw on the night of the "blood moon," and again on Sept. 23 (another date with supposed apocalyptic significance). But the end of days never arrived.

The doomsday clock may still be ticking, but the time bomb is more likely to go off outside the U.S. while bonds remain the world's safest and most resilient economic bomb shelter.

https://au.finance.yahoo.com/news/china-selling-us-treasurys-really-110000250.html
Selling to who :D :D :D
http://www.afr.com/content/dam/images/g/n/2/1/u/8/image.imgtype.afrArticleInline.620x0.png/1456285515560.png
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Jimbo
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foxbat
17 Oct 2015, 10:25 PM
Selling to who :D :D :D
The trillion dollar question.
Matthew, 30 Jan 2016, 09:21 AM Your simplistic view is so flawed it is not worth debating. The current oversupply will be swallowed in 12 months. By the time dumb shits like you realise this prices will already be :?: rising.
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Rastus2
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foxbat
17 Oct 2015, 10:25 PM
Selling to who :D :D :D

Selling for what currency ?

Or, perhaps, simply exchanging for other assets ?
Shadow - Defrauded his Bank ? 2015 I have 9 different loans and my bank had no idea which ones were personal and which were investment. They had half of them classed incorrectly. When this change came in they asked me to tell them if any personal loans were incorrectly classed as investment, which I did, and they switched them to personal for the lower rate. They also had a couple of investment loans incorrectly classed as personal. They didn't ask me about those. So they stay on the lower rate too. Worked out pretty well. :)
Shadow - 2008 Sydney Median House Price 1.25M by 2014-2015

Shadow : I think this boom has already begun in several cities. My prediction :
Peak of boom: 2014-2015. Sydney Median Price: $1,250,000 Bottom of bust: 2017-2018. Sydney Median Price: $1,100,000

Shadow's Original 2010 House Boom and Crash prediction http://s836.photobucket.com/user/rastus22/media/shady-orig-2010-chart.png.html?sort=3&o=0

Shadow's attempt to edit his 2010 chart in 2015 and replace it with one that does not show a crash in 2013 http://s836.photobucket.com/user/rastus22/media/Screen%20Shot%202015-06-06%20at%207.12.52%20pm_1.png.html
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newjez
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I thought you said the US was going to collapse BP?
Whenever you have an argument with someone, there comes a moment where you must ask yourself, whatever your political persuasion, 'am I the Nazi?'
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Ex BP Golly
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foxbat
17 Oct 2015, 10:25 PM
Selling to who :D :D :D
Aliens on that fast approaching Planet X bought them.

They are also buying Aussie houses, and that's why prices are going to the moon!

Isn't that right BP?
WHAT WOULD EDDIE DO? MAAAATE!
Share a cot with Milton?
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Jimbo
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Ex BP Golly
18 Oct 2015, 06:23 AM
Isn't that right BP?
It's a well established fact that BP is in fact Mike.

The BP persona says the things that the Mike property developer persona can't say.

Mike goes AWOL and Matthew appears.

Draw your own conclusions.
Matthew, 30 Jan 2016, 09:21 AM Your simplistic view is so flawed it is not worth debating. The current oversupply will be swallowed in 12 months. By the time dumb shits like you realise this prices will already be :?: rising.
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Ex BP Golly
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Jimbo
18 Oct 2015, 06:35 AM
It's a well established fact that BP is in fact Mike.

The BP persona says the things that the Mike property developer persona can't say.

Mike goes AWOL and Matthew appears.

Draw your own conclusions.
My conclusion is that Nabiru and Planet X are going to collide over Brisvegas and the Gold Coast, killing of most off Australia's supply of retirees, instantly improving Australia's economy and creating a huge greenfield redevelopment opportunity.

Mike can't lose, and we will never hear from BP again.
Edited by Ex BP Golly, 18 Oct 2015, 06:55 AM.
WHAT WOULD EDDIE DO? MAAAATE!
Share a cot with Milton?
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Black Panther
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newjez
18 Oct 2015, 02:52 AM
I thought you said the US was going to collapse BP?
I hope it doesn't, however most indicators seem to suggest otherwise.

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newjez
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Jimbo
18 Oct 2015, 06:35 AM
It's a well established fact that BP is in fact Mike.

The BP persona says the things that the Mike property developer persona can't say.

Mike goes AWOL and Matthew appears.

Draw your own conclusions.
Don't think so.
Whenever you have an argument with someone, there comes a moment where you must ask yourself, whatever your political persuasion, 'am I the Nazi?'
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