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###POV. WHAT COULD CHINA BUY INSTEAD OF.....>

US TSYS
US TSYS: ###POV. WHAT COULD CHINA BUY INSTEAD OF TREASURIES?
- Bloomberg headlines earlier: "officials said to recommend slowing or halting
Tsy buying" and "officials said to eye debt supply, trade tensions and view
Treasuries as less attractive" hurt the UST and rightly so; China holds $1.3trn
of US debt. But if they don't buy USTs what do they buy?
- It will not be only EGBs. With the rising Fed rates, flat yield curve and need
for dollars, China will probably substitute short-dated assets. TICS data show
that Chinese banks and official sector held E103.5bln US bank deposits in
October last year, more bank deposits seem likely. Years ago, China also owned
loads of T-Bill but only $3.6bln according to latest data. Today's headline
suggest that Treasuries are less "attractive" but bills might be more attractive
at current yields.
- Finally, China Investment Corporation is the sovereign wealth fund investors
in equities and infrastructure etc. This has quickly grown assets under
management from an initial $200bln seed money when created in 2007 but had
$800bln+ in 2015 and could easily be given more assets.

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