WHO WOULD KNOW BETTER THAN CHINA HAS NO FUTURE?:

China finds new ways to buy U.S. debt: Anonymous purchases made through unconventional channels would allow Chinese to remain biggest holders of American bonds (BRIAN MILNER, 2/21/10, Globe and Mail )

"We do not believe that the Chinese are dumping Treasuries," Arthur Kroeber, managing director of GaveKal Dragonomics, a Beijing research firm, told Associated Press. "What they are doing is diversifying the channels through which they make these purchases so that it is much more difficult for the market to ascertain what they are doing." [...]

U.S. data show that China reduced its holding of Treasury bills in December by $34.2-billion (U.S.) - a 4.3-per-cent decline - which pushed it into second place behind Japan as the largest foreign holder of U.S. debt.

But the Chinese increased their holdings of longer-term U.S. government bonds, even though rates at the long end of the yield curve are expected to rise.

"It's a little odd for the Chinese to be getting rid of short-term U.S. Treasuries and buying long-term bonds right now," Dr. Prasad said.

Such a shift makes some sense, because short-term notes are paying virtually nothing, while 10-year bonds carry close to 3-per-cent interest. "But the Chinese have expressed a lot of concerns about the high levels of U.S. debt and deficits," Dr. Prasad said.

As always, follow the money.

Posted by Orrin Judd at February 21, 2010 12:04 PM