{"id":26739,"date":"2017-10-11T20:48:12","date_gmt":"2017-10-12T01:48:12","guid":{"rendered":"http:\/\/olduvai.ca\/?p=26739"},"modified":"2017-10-11T20:48:12","modified_gmt":"2017-10-12T01:48:12","slug":"de-dollarization-not-now","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=26739","title":{"rendered":"De-dollarization Not Now"},"content":{"rendered":"
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De-dollarization Not Now<\/span><\/a><\/h3>\n<\/header>\n
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USD-denominated debt outside the US hits record \u2013 even junk bonds.<\/strong><\/p>\n

China announced today that it would sell $2 billion in government bonds denominated in US dollars. The offering will be China\u2019s largest dollar-bond sale ever. The last time China sold dollar-bonds was in 2004.<\/p>\n

Investors around the globe are eager to hand China their US dollars, in exchange for a somewhat higher yield. The 10-year US Treasury yield is currently 2.34%. The 10-year yield on similar Chinese sovereign debt is 3.67%.<\/p>\n

Credit downgrade, no problem. In September, Standard & Poor\u2019s downgraded China\u2019s debt (to A+) for the first time in 19 years, on worries that the borrowing binge in China will continue, and that this growing mountain of debt will make it harder for China to handle a financial shock, such as a banking crisis.<\/p>\n

Moody\u2019s had already\u00a0downgraded<\/a> China in May (to A1) for the first time in 30 years. \u201cThe downgrade reflects Moody\u2019s expectation that China\u2019s financial strength will erode somewhat over the coming years, with economy-wide debt continuing to rise as potential growth slows,\u201d it said.<\/p>\n

These downgrades put Standard & Poor\u2019s and Moody\u2019s on the same page with Fitch, which had downgraded China in 2013.<\/p>\n

But the Chinese Government doesn\u2019t exactly need dollars. On October 9th, it reported that foreign exchange reserves \u2013 including $1.15 trillion in US Treasuries, according the US Treasury Department \u2013 rose to $3.11 trillion at the end of September, an 11-month high, as its crackdown on capital flight is bearing fruit (via Trading Economics<\/a>):<\/p>\n

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So why does China want<\/em> these $2 billion in US dollars? For one, they\u2019re still cheap, given the low yield, which is expected to rise as the Fed has started to unwind QE. And two, China might be interested in creating a benchmark for dollar-bond trading in China that could help set prices for Chinese corporate debt denominated in dollars. And there\u2019s a lot of it.<\/p>\n

…click on the above link to read the rest of the article…<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

De-dollarization Not Now USD-denominated debt outside the US hits record \u2013 even junk bonds. China announced today that it would sell $2 billion in government bonds denominated in US dollars. The offering will be China\u2019s largest dollar-bond sale ever. The last time China sold dollar-bonds was in 2004. Investors around the globe are eager to […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[130,1025,195,541,2639,839,4254,4255],"class_list":["post-26739","post","type-post","status-publish","format-standard","hentry","category-economics","tag-china","tag-de-dollarization","tag-debt","tag-moodys","tag-standard-and-poors","tag-us-dollar","tag-wolf-richter","tag-wolfstreet"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/26739","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=26739"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/26739\/revisions"}],"predecessor-version":[{"id":26740,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/26739\/revisions\/26740"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=26739"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=26739"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=26739"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}