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  #231  
Old 01-10-2018, 12:54 PM
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http://www.bloomberg.com/news/articl...ess-attractive

Quote:
China Weighs Slowing or Halting Purchases of U.S. Treasuries
Bloomberg News
January 10, 2018, 5:26 AM EST Updated on January 10, 2018, 8:57 AM EST
Officials have recommended slowing or halting purchases
China is world’s biggest foreign holder of U.S. Treasuries
Spoiler:
China added to bond investors’ jitters on Wednesday as traders braced for what they feared could be the end of a three-decade bull market.

Senior government officials in Beijing reviewing the nation’s foreign-exchange holdings have recommended slowing or halting purchases of U.S. Treasuries, according to people familiar with the matter. The news comes as global debt markets were already selling off amid signs that central banks are starting to step back after years of bond-buying stimulus. Yields on 10-year Treasuries rose for a fifth day, touching the highest since March.


China holds the world’s largest foreign-exchange reserves, at $3.1 trillion, and regularly assesses its strategy for investing them. It isn’t clear whether the officials’ recommendations have been adopted. The market for U.S. government bonds is becoming less attractive relative to other assets, and trade tensions with the U.S. may provide a reason to slow or stop buying American debt, the thinking of these officials goes, according to the people, who asked not to be named as they aren’t allowed to discuss the matter publicly. China’s State Administration of Foreign Exchange didn’t immediately reply to a fax seeking comment on the matter.


“With markets already dealing with supply indigestion, headlines regarding potentially lower Chinese demand for Treasuries are renewing bearish dynamics,” said Michael Leister, a strategist at Commerzbank AG. “Today’s headlines will underscore concerns that the fading global quantitative-easing bid will trigger lasting upside pressure on developed-market yields.”

The Chinese officials didn’t specify why trade tensions would spur a cutback in Treasuries purchases, though foreign holdings of U.S. securities have sometimes been a geopolitical football in the past. The strategies discussed in the review don’t concern daily purchases and sales, said the people. The officials recommended that the nation closely watch factors such as the outlook for supply of U.S. government debt, along with political developments including trade disputes between the world’s two biggest economies when deciding whether to cut some Treasury holdings, the people said.

A top Treasury official signaled confidence in the U.S. government debt market, which at $14.5 trillion is the world’s largest.

“The U.S. Treasury market is a deep, robust market within the world and so we are confident that our economy, with the economy strengthening, that it will remain a deep, robust market,” Under Secretary for International Affairs David Malpass told a group of reporters in Brussels.

Read here about a 1990s episode regarding Treasuries, with Japan.

The 10-year Treasury yield was about four basis points higher at 2.59 percent as of 8:48 a.m. in New York.

Any reduction in Chinese purchases would come just as the U.S. prepares to boost its supply of debt. The Treasury Department said in its most recent quarterly refunding announcement in November that borrowing needs will increase as the Federal Reserve reduces its balance sheet and as fiscal deficits look set to widen.

“It’s a complicated chess game as with everything the Chinese do,” said Charles Wyplosz, a professor of international economics at the Graduate Institute of International and Development Studies in Geneva. “For years they have been bothered by the fact that they are so heavily invested in one particular class of U.S. bonds, so it’s just a question of time before they would try to diversify.”

Some investors said that the market could take the China news in stride, considering the nation’s net purchases of Treasuries have already slowed “significantly.”

“If China ceases to be a net purchaser of U.S. Treasuries, this is unlikely to have a significant impact on the overall yield curve unless China divests a large share of its total holdings in a short time period,” said Rajiv Biswas, Singapore-based chief Asia-Pacific economist at IHS Markit.

Yields were already climbing this week amid expectations the improving global economy will boost inflation pressures round the world, just as major central banks scale back their asset purchases.

Markets are also braced for a deluge of debt supply this week. The U.S. is scheduled to reopen $20 billion of 10-year debt Wednesday, followed by $12 billion of 30-year bonds Thursday. Germany sold 4.03 billion euros of 0.5 percent 10-year bonds Wednesday with syndications in Italy and Portugal to follow.
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  #232  
Old 01-10-2018, 02:09 PM
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Quote:
Chinaís State Administration of Foreign Exchange didnít immediately reply to a fax seeking comment on the matter.
fax?
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  #233  
Old 01-10-2018, 02:24 PM
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Bill Gross says a bond bear market is upon us. Things could get interesting. 25 year trend lines have been broken.

https://www.bloomberg.com/news/artic...it-speculation
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  #234  
Old 01-12-2018, 01:30 PM
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he said exactly the same thing nearly exactly 1 year ago.
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  #235  
Old 01-12-2018, 01:57 PM
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Quote:
Originally Posted by MathGeek92 View Post
he said exactly the same thing nearly exactly 1 year ago.
https://www.reuters.com/article/us-f...-idUSKBN14U1I4

Quote:
#MONEY JANUARY 10, 2017 / 8:01 AM / A YEAR AGO
Bill Gross: Secular bear bond market to begin if 10-year Treasury yield tops 2.60 percent
Jennifer Ablan
3 MIN READ

NEW YORK (Reuters) - If the yield on the benchmark 10-year Treasury note moves above 2.60 percent, a secular bear bond market has begun, investor Bill Gross warned on Tuesday.
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  #236  
Old 01-12-2018, 03:41 PM
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to be fair, he said it started in 2016:

http://www.thinkadvisor.com/2018/01/...paign=01122018

Quote:
Bill Gross: Bear Market in Bonds Is Already Here
Gross says the bear market started in July 2016 when the 10-year Treasury yield fell to 1.45%


U.S bonds are in a bear market that started in July 2016 when the 10-year Treasury note “double-bottomed at 1.45%,” says Bill Gross, the Pimco co-founder who’s now a portfolio manager for the Global Unconstrained Bond and Total Return strategies at Janus Henderson.

The July bottoms signified the end of a bull market that began 35 years earlier, but they weren't recognized as such at the time, notes Gross in his latest market outlook.

“Eighteen months ago, it was obvious to most observers that the economy, measured by nominal GDP, was not going to go much lower than 3% and that the Fed was having second thoughts about quantitative easing,” but the bond market wasn’t priced for that, writes Gross. It was priced instead for “perpetual QE and the possibility of a deflationary collapse in the economy” — neither of which happened.

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  #237  
Old 01-13-2018, 02:19 PM
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Quote:
Originally Posted by campbell View Post
or not

https://www.yahoo.com/news/china-den...--finance.html

Quote:
China denies report it could halt US bond purchases
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  #238  
Old 02-05-2018, 05:07 PM
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https://www.washingtonpost.com/news/...=.a9b4b95f2eb8

Quote:
The U.S. government is set to borrow nearly $1 trillion this year, an 84 percent jump from last year

Spoiler:
t was another crazy news week, so it's understandable if you missed a small but important announcement from the Treasury Department: The federal government is on track to borrow nearly $1 trillion this fiscal year — Trump's first full year in charge of the budget.

That's almost double what the government borrowed in fiscal year 2017.

Here are the exact figures: The U.S. Treasury expects to borrow $955 billion this fiscal year, according to a documents released Wednesday. It's the highest amount of borrowing in six years, and a big jump from the $519 billion the federal government borrowed last year.

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Treasury mainly attributed the increase to the “fiscal outlook.” The Congressional Budget Office was more blunt. In a report this week, the CBO said tax receipts are going to be lower because of the new tax law.

24:43
Watch Trump’s full speech on the economy

0:00

President Trump said during a Jan. 18 speech in Coraopolis, Pa., that Republicans’ tax overhaul is already benefiting the U.S. economy. (The Washington Post)

The uptick in borrowing is yet another complication in the heated debates in Congress over whether to spend more money on infrastructure, the military, disaster relief and other domestic programs. The deficit is already up significantly, even before Congress allots more money to any of these areas.


“We're addicted to debt,” says Marc Goldwein, senior policy director at Committee for a Responsible Federal Budget. He blames both parties for the situation.

What's particularly jarring is this is the first time borrowing has jumped this much (as a share of GDP) in a non-recession time since Ronald Reagan was president, says Ernie Tedeschi, a former senior adviser to the U.S. Treasury who is now head of fiscal analysis at Evercore ISI. Under Reagan, borrowing spiked because of a buildup in the military, something Trump is advocating again.


Trump didn't mention the debt — or the ongoing budget deficits — in his State of the Union address. The absence of any mention of the national debt was frustrating for Goldwein and others who warn that America has a major economic problem looming.

“It is terrible. Those deficits and the debt that keeps rising is a serious problem, not only in the long run, but right now,” Harvard economist Martin Feldstein, a former Reagan adviser, told Bloomberg.

1:09
Dow sees biggest drop since 2016

0:00

A strong jobs report and disappointing earnings slammed Wall Street on Feb. 2. The Dow suffered its worst percentage drop since June 2016. (Reuters)

The White House got a taste of just how problematic this debt situation could get this week. Investors are concerned about all the additional borrowing and the likelihood of higher inflation, which is why the interest rates on U.S. government bonds hit the highest level since 2014. That, in turn, partly drove the worst weekly sell-off in the stock market in two years.


The belief in Washington and on Wall Street has long been that the U.S. government could just keep issuing debt because people around the world are eager to buy up this safe-haven asset. But there may be a limit to how much the market wants, especially if inflation starts rising and investors prefer to ditch bonds for higher-returning stocks.

“Some of my Wall Street clients are starting to talk recession in 2019 because of these issues. Fiscal policy is just out of control,” says Peter Davis, a former tax economist in Congress who now runs Davis Capital Investment Ideas.

The Federal Reserve was also buying a lot of U.S. Treasury debt since the crisis, helping to beef up demand. But the Fed recently decided to stop doing that now that the economy has improved. It's another wrinkle as Treasury has to look for new buyers.

Tedeschi, the former Treasury adviser to the Obama administration, calls it “concerning, but not a crisis.” Still, he says it's a “big risk” to plan on borrowing so much in the coming years.


Trump's Treasury forecasts borrowing over $1 trillion in 2019 and over $1.1 trillion in 2020. Before taking office, Trump described himself as the “king of debt,” although he campaigned on reducing the national debt.

The Committee for a Responsible Federal Budget predicts the U.S. deficit will hit $1 trillion by 2019 and stay there for a while. The latest borrowing figure — $955 billion — released this week was determined from a survey of bond market participants, who tend to be even faster to react to the changing policy landscape and change their forecasts.

Both parties claim they want to be “fiscally responsible,” but Goldwein says they both pass legislation that adds to the debt. Politicians argue this is the last time they'll pass a bill that makes the deficit worse, but so far, they just keep going.

The latest example of largesse is the GOP tax bill. It's expected to add $1 trillion or more to the debt, according to nonpartisan analysis from the Joint Committee on Taxation (and yes, that's after accounting for some increased economic growth).


But even before that, Goldwein points to the 2015 extension of many tax cuts and the 2014 delays in Medicare reimbursement cuts.

“Every time you feed your addiction, you grow your addiction,” says Goldwein.

There doesn't seem to be any appetite for budgetary restraint in Washington, but the market may force Congress' hand.

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