Economy

Reports that China may halt U.S. government bond purchases may be incorrect

Reports that China may halt U.S. government bond purchases may be incorrect

"All of last year there was this fantastic correlation between USA 10-year yields and dollar-yen and people put on what is known as pairs trades", said Greg Anderson, global head of FX strategy at BMO Capital Markets in NY. As in 2009, the latest news fanning concern about China's appetite for USA borrowings comes at an inopportune time, with the Treasury set to ramp up issuance as the Federal Reserve is shrinking its balance sheet.

China has the world's biggest foreign reserves of about US$3.1 trillion by December, which rose slightly in 2017 because of a 6.7 per cent appreciation of the Chinese currency.

"It's hard to see how China would emerge from this scenario better off", said Mark Williams chief Asia economist at research firm Capital Economics.

And while 2018 has brought some telegraphed risks into sharper focus, nothing has rocked the foundation of the $14.5 trillion Treasuries market, said Aaron Kohli, an interest-rate strategist at BMO Capital Markets in NY. The strategies discussed in the review don't concern daily purchases and sales, said the people.

Any reduction in Chinese purchases would come just as the United States prepares to boost its supply of debt. "I don't think we're headed for investment Armageddon".

Bloomberg reported that Chinese authorities were considering slowing or stopping the purchase of US Treasury debt, but China shot it down as "fake news".

"But China is the largest buyer [of US Treasuries], what it says will deeply influence investors' sentiments".

Iran Rejects Trump's Demands to Change 2015 Nuclear Deal
Trump's declaration puts great pressure on Britain, France and Germany, the European signatories to nuclear pact with Iran. Trump made the threat as he extended waivers of key economic sanctions on Iran, keeping the accord alive at least for now.

All told, the three central banks are sitting on $14 trillion in securities they have bought since 2009: a $4.4 trillion mix of Treasuries and mortgage securities held by the Federal Reserve; the European Central Bank's $5 trillion in corporate and government bonds; and $4.5 trillion worth of bonds and exchange traded funds accumulated by the Bank of Japan. The session high for the global benchmark was US$69.37, highest since May 2015.

However, Innes said the uncertainty over China's stance could potentially dampen investors' risk appetite, while the dollar would likely face headwinds against the yen due to speculation about the Bank of Japan's future exit from its massive stimulus policy.

For his part, Jeffrey Gundlach, known on Wall Street as the "Bond King", said on an investor webcast on Tuesday that if the 10-year Treasury yield pushes above 2.63 percent, it will accelerate higher.

Some market experts speculate that China might want to send a message to President Trump over trade.

The Gordon Brown example highlights why Commonwealth Bank of Australia is saying Wednesday's reports over China and its US Treasury holdings are unreliable.

In order for bond yields to move higher, bond prices would have to fall as the "coupon" interest payment is fixed at the point when new bonds are issued and can not be changed to compensate for higher (better) base rates.


  • Arab League Requests International Aid for Palestinian State

    Arab League Requests International Aid for Palestinian State

    UNRWA has always been criticized for allowing itself to be exploited by radical elements within the Palestinian power structure. The Palestinians say Israeli settlements in the West bank, a key issue in peace talks, deny them a viable contiguous state.

    Eastern Bank Trims Holdings in Procter & Gamble Co (NYSE:PG)

    Everett Harris & Company increased Facebook Inc (NASDAQ:FB) stake by 12,233 shares to 183,957 valued at $31.43 million in 2017Q3. Following the transaction, the insider now owns 20,135 shares of the company's stock, valued at approximately $1,794,229.85.
    Spurs boss Pochettino hails 2-goal Kane: He just keeps doing it

    Spurs boss Pochettino hails 2-goal Kane: He just keeps doing it

    But he says the loyalty of Kane, who has 125 Spurs goals in all competitions, makes him different to most modern players. Obviously, it's something I have to address now.
  • Vikings will reportedly activate Sam Bradford against Saints in divisional round

    Vikings will reportedly activate Sam Bradford against Saints in divisional round

    Let's not forget the Saints played in the most hard division in football and they still were first in yards-per-play differential. Not only is Kamara a threat on the ground, he's established himself as a viable asset out of the backfield in the passing game.
    DeMar DeRozan knows Cavaliers will want to avenge Raptors rout

    DeMar DeRozan knows Cavaliers will want to avenge Raptors rout

    Still, the Cavs reportedly view him as an asset they can move "in the right deal" before the NBA's February 8th trade deadline. The Pacers (22-20) need more of the good Stephenson on the road to make their trip successful.
    Abe kicks off six-nation European tour in Estonia

    Abe kicks off six-nation European tour in Estonia

    Mr Abe will then visit fellow Baltic states Latvia and Lithuania, before continuing on to Bulgaria, Serbia and Romania.
  • Vikings activate Sam Bradford to 53-man roster

    Vikings activate Sam Bradford to 53-man roster

    Keenum also held a passer rating above 100 eight times this season while tossing multiple touchdowns seven times. The Vikings have four quarterbacks on their 53-man roster: Keenum, Bradford, Teddy Bridgewater and Kyle Sloter .
    Mourinho Admits He Could Sell United Star, This Month

    Mourinho Admits He Could Sell United Star, This Month

    Also, while mentioning the United's training schedule in Dubai, Mourinho concluded, "It was very good. So Saturday [he is] training, then Sunday [he is] selected and Monday [he will] play".
    LG InstaView ThinQ Alexa fridge adds clever kitchen tricks

    LG InstaView ThinQ Alexa fridge adds clever kitchen tricks

    There's also a camera inside the fridge which you can view from a smartphone to check its contents remotely. The smart kitchen has been on the precipice of going mainstream for years now.
  • Pingtan Marine Enterprise Ltd. (PME) Reaches $3.80 After 6.00% Down Move; Suncoke Energy (SXC)'s Sentiment Is

    The institutional investor owned 14,190 shares of the company's stock after buying an additional 240 shares during the period. Barclays Capital downgraded SunCoke Energy Partners , L.P. (NYSE:SXCP) on Monday, January 11 to "Underweight" rating.
    Plane skids off runway in northern Turkey

    Plane skids off runway in northern Turkey

    Yucel Yavuz said all 162 passengers and crew on board were evacuated and safe early Sunday. Other images from Dogan news agency showed smoke emanating from the trapped plane .
    15 dead in California mudslides

    15 dead in California mudslides

    Due to the unsafe conditions caused by the rain, it is proving hard for them to safely search for anyone trapped. Lowe, who also has a home in Montecito, wrote on Twitter he was "mourning the dead in our little town tonight".