China Dumps US Assets
EpSil0n-// <[email protected]> Thu, 18 Feb 2010 18:14:58 -0600 (CST)
| Newsgroups | gmane.politics.progressive.news |
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China Dumps US Asset Backeds and Corporates
February 9th, 2010
By David Goldman
Dollar-denominated risk assets, including asset-backed securities and
corporates, are no longer wanted at the State Administration of Foreign
Exchange (SAFE), nor at Chinas large commercial banks. The Chinese
government has ordered its reserve managers to divest itself of riskier
securities and hold only Treasuries and US agency debt with an implicit or
explicit government guarantee. This already has been communicated to
American securities dealers, according to market participants with direct
knowledge of the events.
It is not clear whether Chinas motive is simple risk aversion in the wake
of a sharp widening of corporate and mortgage spreads during the past two
weeks, or whether there also is a political dimension. With the expected
termination of the Federal Reserves special facility to purchase
mortgage-backed securities next month, some asset-backed spreads already
have blown out, and the Chinese institutions may simply be trying to get
out of the way of a widening. There is some speculation that Chinas action
has to do with the recent deterioration of US-Chinese relations over arm
sales to Taiwan and other issues. That would be an unusual action for the
Chinese to takeBeijing does not mix investment and strategic policyand
would be hard to substantiate in any event.
http://blog.atimes.net/?p=1352
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<p><br>
China Dumps US Asset Backeds and Corporates<br>
February 9th, 2010<br>
By David Goldman<br>
<br>
Dollar-denominated risk assets, including asset-backed securities and <br>
corporates, are no longer wanted at the State Administration of Foreign <br>
Exchange (SAFE), nor at Chinas large commercial banks. The Chinese <br>
government has ordered its reserve managers to divest itself of riskier <br>
securities and hold only Treasuries and US agency debt with an implicit or <br>
explicit government guarantee. This already has been communicated to <br>
American securities dealers, according to market participants with direct <br>
knowledge of the events.<br>
<br>
It is not clear whether Chinas motive is simple risk aversion in the wake <br>
of a sharp widening of corporate and mortgage spreads during the past two <br>
weeks, or whether there also is a political dimension. With the expected <br>
termination of the Federal Reserves special facility to purchase <br>
mortgage-backed securities next month, some asset-backed spreads already <br>
have blown out, and the Chinese institutions may simply be trying to get <br>
out of the way of a widening. There is some speculation that Chinas action <br>
has to do with the recent deterioration of US-Chinese relations over arm <br>
sales to Taiwan and other issues. That would be an unusual action for the <br>
Chinese to takeBeijing does not mix investment and strategic policyand <br>
would be hard to substantiate in any event.<br>
<br>
<a href="http://blog.atimes.net/?p=1352">http://blog.<wbr>atimes.net/<wbr>?p=1352</a><br>
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