Fed's Bullard: China selling US Treasuries not as big a threat as it is made out to be

Author: Justin Low | Category: Central Banks

Further comments by Bullard

  • Flat US yield curve is a little bit worrisome
  • Hopes that yield curve will steepen somewhat from here
  • Chances of global or US recession is 'no higher than it ever was'
From a logical perspective, the threat of China selling Treasuries isn't that great as you would think that other nations would easily snap them up considering the kind of yields present in the US - where it's tough to find elsewhere around the world among developed/stable nations. However, if you argue that China is to sell more than a handful then perhaps it could destabilise the market although it is extremely unlikely they'd resort to that.

The issue with getting money out of Treasuries is that it will still be in US dollars, unless the Chinese are going to repatriate that money. And that in itself is another issue because it would just then cause the dollar to be weaker, which works in favour of Trump and make it more expensive for Chinese exporters.

All this is theory and we can argue about it all day and all night. But one thing's for sure, it's not as simple and straightforward as it looks.

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