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mercoledì 22 luglio 2015

Durden: China's Record Dumping Of US Treasuries Leaves Goldman Speechless

La Cina, nel bel mezzo di un crollo piuttosto epico della sua borsa, sta smollando Treasuries USA a ritmi ancor più epici? mezzo triolione in un anno .. e non solo Treasuries, non solo debito USA ma, pare, anche altri asset denominati in dollari ..

Incidentally, $520 billion is roughly triple what implied Treasury sales would suggest as China's capital outflow, meaning that China is also liquidating some other USD-denominated asset(s) at a feverish pace.
So far we do not know which, but the chart above and the magnitude of the Chinese capital outflow is certainly the biggest story surrounding the world's most populous nation: what is happening in its stock market is just a diversion

(...) while there has been latent speculation over the years that China will dump US treasuries voluntarily because it wants to (as punishment or some other reason), suddenly China is forced to liquidate US Treasury paper even though it does not want to, merely to fund a capital outflow unlike anything it has seen in history.
It still has a lot of 10 Year paper, aka FX reserves, left: about $1.3 trillion at last check, however this raises two critical questions:
i) what happens to 10 Year rates when whoever has been absorbing China's Treasury dump no longer bids the paper and
ii) how much more paper can China sell before the entire world starts paying attention, besides just JPM and Goldman... and this website of course. 

Finally, if China's selling is only getting started, just what does this mean for future Fed strategy. Because one can easily forget a rate hike if in addition to rising short-term rates, China is about to dump a few hundred billion in paper on a vastly illiquid market

Or let us paraphrase: how soon until QE 4?

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