Displaying items by tag: mortgage bonds

Friday, 29 June 2018 09:43

How China Might Weaponize Its Treasuries

(Beijing)

One of the big downside risks for the US in its current trade war with China concerns the fact that Beijing owns $1.18 tn of US Treasuries. They also own billions of US mortgage bonds. The big question is whether they will decide to use such ownership as a weapon against the US. For instance, if they sold off large quantities of the bonds, it could send US yields spiking. However, it seems unlikely they would do say for a number of reasons. Firstly, it would hurt the value of their own holdings and all their other Dollar-denominated assets, and it would engender a lot more punitive action from the US. Some consider it the economic equivalent of “mutually assured destruction”.


FINSUM: This is a grave risk for the US because of how it would push up rates all through the economy, but we do not think the trade war has gotten this serious yet.

Published in Bonds: Total Market

Contact Us

Newsletter

Subscribe

Subscribe to our daily newsletter

Top
We use cookies to improve our website. By continuing to use this website, you are giving consent to cookies being used. More details…