Tag Archives: bonds

Business/Economics, International, U.S.

What Economic Recovery? China will stop selling U.S. bonds, and they will stop buying them as well, beginning to realize just how much power they truely have

“In my opinion, at this moment, the best strategy is no buy, no sell. At this moment, it’s very difficult to shift (investment), to change fundamentally, because we hold such a big amount.”-Cheng Siwei, former senior Chinese lawmaker

Cheng Siwei, is advising the Chinese government to take a “no buy, no sell” attitude towards U.S. Treasury bonds.  Cheng is telling the government that it needs to hold off on investing it’s $3.2 trillion in foreign exchange reserves.

Many European countries have been knocking down China’s door, begging China to bail them out by buying their bonds, instead of more U.S. bonds.

Cheng says the situation for China has become more of a political one, than an economic one.  In other words, with so many countries, including the United States, hoping to be saved by China’s cash, the Chinese are starting to realize just how much power they have.

Business/Economics, International, U.S.

U.S. Debt: The Big Three countries U.S. taxpayers are beholded to, U.S. government bonds drop in rank

Most people know that China is the largest foreign holder of U.S. debt.  Japan is the second biggest, and the United Kingdom (Britain) is the third.

According to the most recent information, China holds a little more than $1 trillion in U.S. government debt (bonds), Japan holds $912 billion and the U.K. holds $346 billion.  Those bonds are held not only by foreign governments, but by private banks and corporations.

Standard & Poor’s downgrade means that U.S. government bonds are now ranked 2nd place.  Germany, United Kingdom and France still hold their triple A 1st place ranks.  Interestingly the Federal Reserve Bank (not a government agency) says the drop in ranking will not change how they handle U.S. bonds.

The problem is that foreign banks will surely change how they handle U.S. bonds.

The majority of U.S. government debt is still held within the United States, by banks, corporations, individuals and taxpayers via the U.S. Treasury.

 

 

Business/Economics, International, Opinion, U.S.

China continues to sell off U.S. bonds

China is the biggest buyer of U.S. sovereign debt (bonds), but has been selling off that debt at a steady pace. In February China sold off $1.15 trillion (yes, trillion) in U.S. bonds.

Chinese officials say the sell off of U.S. bonds could continue for another two months, or as long as the Federal Reserve continues with its quantitative easing (QE) policies.

According to the U.S. Treasury Department, China holds $4.47 trillion in U.S. sovereign debt.  China wants to cut it to less than $1 trillion.  Even then, Chinese officials say holding that much U.S. debt is only good for the short run.  I guess they don’t think the future looks very bright for the United States.

Business/Economics, International, U.S.

Chinese issue warning over U.S. government debt

“The U.S. economic fundamentals are not strong, plus there is expanding fiscal deficit and declining financial revenue. We are closely tracking the performance of U.S. government bonds and considering a further adjustment based on current conditions.”-Guan Jianzhong, Dagong Global Credit Rating Company

It wasn’t just S & P that reduced the credit rating of the Untied States, Dagong Global Credit Rating company also downgraded the U.S.  That’s important, because it’s a Chinese company, and the Chinese hold most of the U.S. sovereign debt.

Chinese Foreign Ministry spokesman Hong Lei, along with several Chinese bank officials, urged the United States to adopt “responsible policies and measures” to protect the interests of investors (mainly Chinese).  The problem is that if those investors think they’re going to lose money then they’re going to start off loading their U.S. bonds in a big way (they’ve already been selling them off, slowly, for the past three months).


International, U.S.

New Chinese Water Torture, dumping U.S. bonds a little at a time

For the fourth month in a row, China is selling off its U.S. Treasury bonds (U.S. Sovereign debt).  China is the biggest holder of U.S. bonds, but since February, they’ve been getting rid of them, a little at a time.

So far the Chinese have sold U.S.$600 million in U.S. bonds, that’s according to the U.S. Treasury.

Japan has the second biggest holdings of U.S. Treasuries, but there is concern that Japan will sell them off, to help pay for rebuilding after the March 11 disasters.

Business/Economics, Fukushima

Bank of Japan Floods Economy with Cash, U.S. Bonds could Suffer

Bank of Japan officials are issuing millions in cash, into the Japanese economy.  This is due to the earthquake and tsunami destroying a major part of Japan’s infrastructure.

Major Japanese manufacturers have closed, mainly because employees and supplies can not get to the factories.  Farm lands have been destroyed by the tsunami.

Japan must focus on financing a major recovery effort, and this will affect U.S. Treasury Bonds.  Japan was one of the biggest buyers of U.S. bonds, helping the U.S. government deal with its debt, but now that money will go to rebuilding efforts.  Also, Japan might be forced to sell off its existing holdings of U.S. bonds, to help pay for the rebuilding of their country.  This will affect interest rates in the United States.

For all those electronic junkies out there, get ready for withdrawal symptoms.  Japan is a crucial electronics supplier, but don’t expect anything now. About 40% of lightweight chips, for computers and phones, are supplied by Japan. Objective Analysis, a semiconductor research firm, said “This may cause phenomenal shortages…”.  You can bet this will affect prices of goods, and trading in stock markets around the world.

Like your Blue-Ray movies?  Forget it, Sony shut down operations at their Blue-Ray plant in Japan, thanks to the disaster.

Were you thinking about getting one of those gas saving Toyota Prius, or Honda Fit?  They are made mainly in Japan, and production has been halted.

Speaking of gas. Expect fuel prices to go up, even more. Japan is being forced to turn to other sources of fuel to run electric generators, now that their nuclear plants are going critical.  Already two tanker ships, with LNG, were diverted from their original destination in Russia, to Japan.

Business/Economics, Opinion, U.S.

Economy About to Crash? What Happened to Recovery? 10 Reasons

March 10, 2011.

“I think this is the beginning of something severe.” said chief investment strategist at Windham Financial Services, Paul Mendelsohn. He’s referring to the more than 220 point drop in the DOW, which got little to no mention in national TV news coverage on March 10. There’s a lot of legitimate reasons for investors getting out of the market, not just in the U.S., but world wide. Those reasons also prove that there is no economic recovery.

Reason 1: First time jobless claims, in the U.S., for state benefits went up, more than expected (again).

Reason 2: World wide unemployment is high. Most of the violence around the world involves unemployment. The current crisis in North Africa and the Middle East is due, in part, to high unemployment rates. In 2010 Macedonia took the top spot with an official unemployment rate of 33.8%. How can the global economy recover when there are so many people not making any money to buy things with?

Reason 3: U.S. trade deficit increased (again).

Reason 4: China’s trade deficit increased (a surprise).

Reason 5: Credit ratings for Greece and Spain decreased (again).

Reason 6: Oil prices remain high, and still look to go higher (it’s interesting how analysts predicted the increase in price, without even considering, or knowing, that there would be a “revolutionary” crisis affecting many oil producing countries, or did they, mmmm?)

Reason 7: Food prices are increasing, worldwide. The UN (United Nations) says it does not see any improvement in food supply worldwide. I have read that Chinese wheat farmers will have only enough harvest for subsistence in 2011, nothing left over to sell. Across the world the food supply (“supply” is the key word, because some areas have plenty of crops but they aren’t getting to market) situation is getting worse for a number of reasons, from climate change, to the cost of transportation, to lack of credit, to political/social instability. A new problem adding to food supply issues is that migrant workers are not working. This is due to things like anti-migrant attitudes in the U.S., and the increasing violence in North Africa and the Middle East.

Reason 8: Union busting in the United States. Why should this be considered a factor? Because the goal of union busting is to reduce pay and benefits for employees. If workers are going to be making even less than what they are now, then that’s less they’ll spend while shopping. Gee, isn’t the U.S. economy a “consumer” based economy, which would mean the more a worker spends the better it is for the economy?

Reason 9: Stagnant pay for 90% of U.S. workers. Recently the IRS (Internal Revenue Service) reported that their own study, into the wages and salaries of taxpayers, reveled that 90% of taxpayers had no increase in pay in the past 20 years (when adjusted for inflation). The study also showed that the top 5% of taxpayers saw a 33% increase in earnings over the same period (also adjusted for inflation). Basic economics states that for an economy to do well the money in the system needs to go through as many hands as possible. Clearly the money is staying at the top and not trickling down.

Reason 10: This is probably a very important sign that there is no U.S. economic recovery. The world’s largest bond fund, PIMCO’s Total Return Fund, dumped all its U.S. government bonds, then moved into cash/cash equivalent big time. Why is that important? PIMCO used to be the biggest holder of U.S. bonds. That’s because they trusted that the U.S. government could pay its debts. By selling ALL its U.S. bonds PIMCO is indicating that they don’t think the U.S. government can pay back its debts. PIMCO has actually told other investors to get out of U.S. bonds. Not good. The move into cash is a traditional investor’s way of preparing for the worst. How much did PIMCO move into cash? In January PIMCO’s cash holdings were about 5%, now they are at 23%, a big jump. PIMCO is now selling off mortgage backed securities, this indicates that PIMCO is expecting another drop in the housing market.

There are plenty of other reason to list, you can do your own homework. Some of my sources: Voice of America, Reuters, CNN, Russia Today, The Atlantic. Do your own research, I’m not getting paid for this.