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Posted on 01/19/2011 3:37:25 AM PST by Erik Latranyi
China, the largest foreign creditor to the U.S., was a net seller of Treasurys in November.
In contrast, Japan boosted its overall holdings of Treasurys, narrowing its holdings gap with China which remains the biggest foreign owner of Treasurys.
The drop in China's overall holdings was due to a shrinkage of $21.1 billion in holdings of T-bills, those Treasury debt that are maturing in one year or less, according to the latest capital flows data from the Treasury Department released Tuesday. China boosted Treasury note and bond holdings by almost $10 billion over the same period.
The data on cross-border capital flows come just hours ahead of Chinese President Hu Jintao's official visit to Washington, where he and his delegation are expected to discuss economic and geopolitical issues with President Barack Obama and members of his cabinet.
China's appetite for Treasurys is closely tracked by market participants. There has been fear that should China sell Treasurys significantly, borrowing cost for U.S. consumers and business would jump and that would hurt the U.S. economy still recovering from the great recession.
The reallocation into longer-dated Treasurys came in a month when the bond market started its two-month selloff. Many investors cashed out of the Treasury market after the Federal Reserve announced in early November the $600 billion bond-buying program, known as the second round of stimulus to support the economy, or QE2 on Wall Street.
The benchmark 10-year Treasury note's yield, which moves inversely to its price, rose by about 20 basis points in November and hit a seven-month peak of 3.568% on Dec. 16. The yield traded at 3.384% Tuesday afternoon.
(Excerpt) Read more at online.wsj.com ...
Probably both.
Treasuries.
...and so it begins.
Obowma bowed to his master in the meeting.
Reading too much into it. The majority of China’s treasury moves are open market operations to peg the Yuan against the dollar. This probably has more to do with movement of Yuan vs. the dollar than anything else.
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