Friday, 13 March 2009

Chinese premier expresses worries about US Treasuries

Yields on long term US Treasuries have been trading in a very narrow range for several weeks as the chart for the exchange traded fund TBT reveals. The fund moves inversely with the price of Treasury bonds of 20 plus years maturity and therefore is a surrogate for the yield.

At this stage it is difficult to have a firm view about a directional trade but the supply of US government paper is becoming more of a concern for the markets and in particular for one of the main purchasers of American government bonds - the Chinese government.

It was reported by AP today that Premier Wen Jiabao called on Washington to see that its response to the global slowdown does not damage the value of Chinese holdings.

He is quoted as follows:

"We have made a huge amount of loans to the United States. Of course we are concerned about the safety of our assets. To be honest, I’m a little bit worried," Wen said at a news conference following the closing of China’s annual legislative session. "I would like to call on the United States to honor its words, stay a credible nation and ensure the safety of Chinese assets."

Reading this I got a minor deja vu of the warnings two years ago coming from some analysts about the deterioration in the housing market and the risk of relaxed credit standards. But not to worry I am sure that the US Treasury are managing the debt issuance in a prudent fashion.

1 comment:

  1. They may well be on to something here