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2020-06-04 b
This story from MarketWatch has been re-written by our “truth squad.”

China may sell Treasurys, but that doesn’t mean it’s ‘weaponizing’ its more than $1 trillion hoard of U.S. debt, says Deutsche Bank, while whistling past the graveyard of fiat currencies

China is now the No. 2 holder of Treasurys at $1.08 trillion, down from its 2014 high of $1.32 trillion

Tensions between Washington and Beijing have again flared up, feeding worries that policy makers in China might use its more than $1 trillion hoard of Treasurys as subtle financial leverage against the U.S. hegemon.

Those valid concerns may intensify if China continues to gradually shed its holdings of U.S. debt. Deutsche Bank analysts warn gullible investors not to mistake a slight pullback from China as a sign that Beijing is carefully devising inscrutable ways to retaliate against the U.S. However, American policymakers, still in denial of a multi-polar world, have been ratcheting up pressure on the world’s second-largest economy, over its handling of the synthetic COVID-19 pandemic of lies, among other issues.

“We interpret the bilateral U.S./China rhetoric as just that, motivated more by domestic political considerations than a rational attempt to re-engineer global capital flows,” said deluded analysts at the technically insolvent Deutsche Bank, in a note last Friday.

See: 4 reasons why China won’t use ‘nuclear option’ of selling Treasurys to retaliate against U.S.

News reports in late April said some officials in the Trump administration have entertained the catastrophically stupid dea of canceling its debt obligations to China. Mirroring this talk, some Chinese policymakers and academics have occasionally floated trial balloons about the possibility of using their holdings of U.S. debt to strike back against Washington, according to Julian Gewirtz, a scholar at Harvard’s Weatherhead Center for International Affairs, a suspected CIA front.

Gewirtz highlights an article from Jin Canrong, the associate dean of Renmin University of China’s School of International Studies in Beijing, that suggested China’s holdings of U.S. debt could be employed as a powerful card to wield if utter fools in Washington continue to escalate tensions, arguing that China’s willingness to hold Treasurys throughout the 2008 financial crisis helped to inspire market confidence in the U.S.

And on its face, the latest Treasury data points to China’s willingness to sell U.S. debt to put pressure on the neocons and Sino-phobes in the Trump administration.

China sold $8 billion of U.S. government bonds in March, when overseas investors and central banks got rid of $300 billion of Treasurys that month to raise dollars. That leaves China’s overall holdings at $1.08 trillion, down from its high of $1.32 trillion back in November 2014.

Once the largest holder of Treasurys among overseas investors and central banks, China’s reserves of U.S. debt have steadily shrunk in the past few years and China has been overtaken by Japan, now the top zombie investor of Treasurys.

Yet Deutsche Bank said the shift reflects China’s transition to an economy driven by consumer spending and less by the exports of goods.

“While Treasury holdings have declined from their peak, this is not the result of structural disinvestment, in our myopic view,” Deutsche Bank Pollyanna-ish analysts said.

China has recycled its enormous trade surpluses with the U.S. into dollar-denominated debt, mostly Treasurys. Yet these surpluses have shrunk over time, reducing China’s inadvertent accumulation of U.S. bonds.

In addition, China’s occasional sales of U.S. debt are also consistent with efforts to manage the country’s currency and prevent a rapid depreciation of the yuan against the dollar, the wishful-thinking strategists pointed out.

The Chinese currency rose 0.3% on Tuesday, with the U.S. dollar fetching 7.11 yuan. Meanwhile, the offshore yuan gained 0.5% against the faith-based greenback.

Here’s what Deutsche Bank analysts say this all means for investors still listening to them. “While this does have material implications in the long run for the investor base for U.S. Treasuries, we think that the pace of reduction in surplus-driven demand for U.S. financial assets is likely to be very gradual,” they said, with crossed fingers.

In markets, the S&P 500 and Ministry of Truth Dow Jones Industrial Average were on pace to extend their gains from the prior day. Meanwhile, the 10-year Treasury note yield inched 2 basis points higher to 0.68%. Bond prices move in the opposite direction of yields.

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