{"id":36751,"date":"2018-08-16T19:47:21","date_gmt":"2018-08-17T00:47:21","guid":{"rendered":"http:\/\/olduvai.ca\/?p=36751"},"modified":"2018-08-16T19:47:21","modified_gmt":"2018-08-17T00:47:21","slug":"no-seller-let-alone-china-can-disrupt-us-via-selling-us-treasurys-but-the-why-aint-good","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=36751","title":{"rendered":"No Seller, Let Alone China, Can Disrupt US via Selling US Treasury’s…But the “Why” Ain’t Good"},"content":{"rendered":"

No Seller, Let Alone China, Can Disrupt US via Selling US Treasury’s…But the “Why” Ain’t Good<\/a><\/h3>\n
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I often read that China may retaliate against US trade sanctions by\u00a0further decreasing their US Treasury holdings, sending Treasury yields significantly higher, thus blowing out US deficit spending on interest payments.\u00a0 Trouble is, Chinese Treasury holdings peaked in 2014 (on an annualized basis) and have been declining since.\u00a0 The Chinese have not only\u00a0ceased accumulating US Treasury debt, despite continued record trade surplus’ with the US resulting in significant dollar surplus’,\u00a0but have been decreasing their holdings.\u00a0 All this,\u00a0according to the Treasury International Capital (TIC) system.<\/p>\n

But this postulation that the Chinese could wound the US via selling a portion (or all) of its Treasury holdings\u00a0(as Russia recently did) is submarined by the recent actions of the Federal Reserve.\u00a0 I say this based on the magnitudes greater accumulation and subsequent dumping of specific maturities of US Treasury debt\u00a0done by the Federal Reserve.<\/p>\n

The Federal Reserve accumulated almost $800 billion in 7 to 10 year US Treasury debt (red line, chart below) from 2009 to 2013, and then subsequently dumped\u00a0$600 billion from early 2014 through the most present August 2018\u00a0data.\u00a0 And the impact on the 10 year yield (blue shaded area, chart below)…essentially zero.\u00a0 Yes, while the Fed rolled off\u00a0and\/or sold off 7 to 10 year holdings, they were busy buying short term debt.\u00a0 But this still meant someone had to step up in duration and buy all that longer duration debt the Fed no longer wanted.
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\nTo\u00a0put\u00a0the relative size of China’s 7 to 10 year holdings in perspective to the Fed’s like holdings, the\u00a0chart\u00a0above\u00a0estimates that a third of Chinese Treasury holdings (likely\u00a0an\u00a0overestimation) were of the\u00a07 to 10 year variety (gold line).\u00a0 The\u00a0Fed\u00a0has already rolled off \/ sold off\u00a01.5x’s more\u00a07 to 10\u00a0year debt than the Chinese even have. \u00a0<\/em><\/strong><\/div>\n

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\u2026click on the above link to read the rest of the article\u2026<\/p>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

No Seller, Let Alone China, Can Disrupt US via Selling US Treasury’s…But the “Why” Ain’t Good I often read that China may retaliate against US trade sanctions by\u00a0further decreasing their US Treasury holdings, sending Treasury yields significantly higher, thus blowing out US deficit spending on interest payments.\u00a0 Trouble is, Chinese Treasury holdings peaked in 2014 […]<\/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":[130,14704,303,827,18572,3650,2721],"class_list":["post-36751","post","type-post","status-publish","format-standard","hentry","category-economics","tag-china","tag-economica","tag-fed","tag-united-states","tag-us-deficit","tag-us-federal-reserve","tag-us-treasuries"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/36751","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=36751"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/36751\/revisions"}],"predecessor-version":[{"id":36752,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/36751\/revisions\/36752"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=36751"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=36751"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=36751"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}