- Hitting the U.S. bond market overnight was a Bloomberg story about Beijing reviewing its policy of buying U.S. government paper. It sounds, however, more like Chinese sources flexing their muscles over trade tensions, rather than real policy change.
- Fixed-income veterans will recall this sort of idea as making plenty of news at least once per year. China's Treasury buys, however, are more about double-entry bookkeeping, and less a conscious investment decision. As long as the country runs a massive trade surplus with the U.S., it will find itself with a huge hoard of dollars looking for a home. The only viable market which can absorb those dollars in the one for U.S. government paper.
- China's purchases of Treasuries will slow when its trade surplus slows.
- The news sent the 10-year U.S. Treasury yield to 2.60% from 2.54% earlier this morning. It's currently at 2.58%, up two basis points on the session. TLT -0.85%, TBT +1.7%
- Now read: Dalio And The Downward Path
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