Under the influence of the expectation that the U.S. economy is gradually entering a recession, global capital is gradually moving away from this land of right and wrong. According to the report on international capital flows released by the U.S. Treasury Department for October, more than $80 billion flowed out of the U.S. market that month, the most noteworthy of which was the sell-off in the U.S. bond market.
Under the influence of the concerted sell-off of all "overseas creditors", the size of the US bond market shrank by $39.1 billion in October. Among them, my country sold 8.5 billion US dollars, and the small days that were still in a big swing last month seem to have repented, what is going on?
As we all know, U.S. bonds are an important means for the United States to harvest global wealth. When countries around the world exchange hard work for a lot of "green paper", the United States uses various means to restrict other countries from buying American products, for example, China is unable to purchase high-end chips from the United States because of the restrictions of the "Chips Act", and countries are forced to buy US bonds to "eat interest".
Although the United States has carried out many large interest rate hikes in 2023, what they can't figure out is that the routine of "high-interest savings" can't be played. After selling 8.5 billion yuan in October, China's U.S. debt quota has fallen to 769.6 billion US dollars, a decrease of about 97.5 billion US dollars from the beginning of this year.
Although the operation of "planting flowers and dumping US bonds" has attracted the attention of the world, those low-key "US allies" seem to hate US bonds more than us. Take Belgium as an example, they were NATO allies, and they sold 31.6 billion U.S. bonds in October, ranking first among the "top ten creditors of the United States".
Although the U.S. domestic market is still using a large amount of assets to buy U.S. bonds, the United States obviously cannot accept the price of losing its "overseas harvest channels". Under the strong call of the United States, Japan and the United Kingdom still gave the boss a little face, and the two countries increased their holdings of US bonds by a total of 35.9 billion.
It is particularly noteworthy that Japan just raised 11.6 billion U.S. bonds in September, while the United Kingdom's ** amount in a report was 12.6 billion U.S. bonds. When you look at the September and October reports together, you can see an interesting phenomenon:On the surface, the small days of "knowing your mistakes and correcting them" have actually increased their holdings of U.S. bonds by only 200 million in two months.
According to statistics, the total scale of "overseas US bonds" is as high as 7,565 billion US dollars, and the face of the "200 million US bonds" in Xiaori may not really be able to help his boss. The yield on the 10-year Treasury note remains unchanged at 3At the high level of 8%, why are "overseas creditors" still unwilling to keep their money in the hands of Lao Mei?
In particular, we must not regard U.S. bonds as "IOUs", and from the perspective of its financial attributes, U.S. bonds are more like a special kind of "**".To put it simply, there are two major similarities between U.S. bonds and **.
First,There is no fixing before the expiration date**. Let's say you have a 10-year Treasury bond with a face value of $100, and its market trade** will only be equal to $100 on the day the bond matures in 10 yearsUntil the bond matures, its market trade** will basically remain in the range of $90 to $100**, and the US Treasury ** will fluctuate randomly like the stock price.
Second, investors can take any ***U.S. bond investors can either buy U.S. bonds directly from the U.S. Treasury Department or buy U.S. bonds from the U.S. Treasury open market, and the difference between this trading channel is that it may be different. Just like shareholders can "play new" and be free.
After recognizing the reality that "U.S. bonds are similar", you can figure out why overseas bondholders are reluctant to continue to buy U.S. bonds, and even the Federal Reserve's repeated interest rate hikes have failed to restore investors' confidence. Just like the weakened Big A, there have been many far-reaching bearish factors in the U.S. bond market.
First, the fundamentals of U.S. Treasuries are not optimistic. After being negatively assessed by Fitch and Moody's, Yellen has repeatedly said that the official does not recognize this "outdated report", but investors are obviously more willing to believe the opinions of these two companies with rich rating experience. In particular, when the United States is still unable to reduce the scale of bond issuance, it is difficult for the fundamentals of US bonds to improve.
Secondly, competition from other assets is also very important. Although the yield of U.S. bonds is indeed good, it is not worth mentioning compared to the U.S. market, which has a record high rate;What makes Lao Mei even more unable to sit still is that even ** is more attractive than U.S. bonds. As we all know, the "gold standard" global economy has become a thing of the past, but the international gold price has risen by more than 12% since the beginning of this year.
Finally, the international recession has also affected the investment demand for U.S. bonds. The "U.S. debt sickle" is indeed quite powerful, but if the United States wants to harvest global wealth, other countries must have dollar reserves. Taking South Korea as an example, they are known as the "canaries of the global economy", and they just managed to overcome the dilemma of the deficit in October, which shows how sluggish the world is.
According to foreign media reports, China is very likely to continue to expand the intensity of selling U.S. bonds in 2024. Although this news has not been officially verified, it is indeed highly likely from two aspects.
First,The renminbi exchange rate needs to be supported by selling US bonds. Although the renminbi has seen a wave of strength last month**, the depreciation of the offshore renminbi exchange rate has still been as high as 3 since the beginning of this year4%。Judging from the signals released by the recent National Economic Work Conference, it is unlikely that the monetary easing will be weakened next year, and the depreciation pressure on the RMB is still not small.
At present, there are two main means for China to support the RMB: one is to increase its holdings, and the other is to "sell US dollars and buy RMB" in the foreign exchange market. Both of these operations require a large amount of dollars to achieve, and the most direct way to obtain dollars is to sell US bonds. Until the renminbi remains stable against the dollar, the selling pressure on U.S. bonds will most likely not abate.
Second,The foreign trade industry needs to be supported by selling US bonds. In the case of real estate extinguishing and domestic investment is difficult to improve quickly, if we want to achieve the goal of economic recovery, we must increase efforts to support the foreign trade industry. According to data from the General Administration of Customs, the total value of China's imports and exports fell by 5 in the first 11 months of this year6% (dollar value), the predicament of the foreign trade industry can be imagined.
At present, the development of "RMB internationalization" is not as optimistic as some bloggers say, and the US dollar is still the most important settlement tool for China's foreign trade enterprises. From the most basic raw material procurement, to the import of high-end chips and other components, to the financial support in the process of expanding overseas markets, the state needs to provide US dollar loan support.
However, it must be emphasized that there is basically no possibility of emptying the US debt in China at present. Those bloggers who advocate emptying US debts like to take the "big goose" as an example, which obviously violates the basic facts of China-US economic and trade relations.
Although the United States launched a "first-class war" against China as early as 2018, this has not changed the overall trend of continuous development of China and the United States. According to public information, the total amount of China and the United States in 2022 will reach 759.4 billion US dollars, continuing to hit a record high and increasing by 125.9 billion US dollars from 2018.
In a single country (that is, excluding international organizations such as the European Union and ASEAN), Lao Mei is still the largest partner of flower growers. Obviously, the "Sino-US break" is not in the overall interests of China's economic recovery, and in 2024, China will still have a large number of exchanges with the United States, and the hundreds of billions of dollars of foreign exchange assets created by China and the United States need to use U.S. bonds as an investment channel.
As the world's largest "debtor" country, the current size of the U.S. debt is as high as 3393 trillion. With such a large market size, the slightest disturbance will have a drastic impact on the global economy. Judging from the current situation, we need to be wary of the three major chain reactions caused by the "sell-off" of US bonds.
First,The "hot money" crisis caused by the reallocation of international capital. The so-called "hot money" refers to those international capitals that aim to make quick money, such as Soros, who became famous by sniping at the pound sterling back then, is a master of "hot money speculation".
Recently, the most important reason for the outstanding performance of India, Laos, Cambodia and other Indo-Pacific regions** is that a large amount of international capital has begun to flow from the U.S. bond market into these markets with lower stock prices in the early stage.
Although many "big leeks" who have been deeply trapped are very envious of these friends in Southeast Asia and South Asia, the violent fluctuations in the capital market caused by "hot money" are not in line with the fundamental interests of China's stable and far-reaching economy. While welcoming the deployment of global capital into China's economy, we must limit the inflow of "hot money", otherwise we will be sniped by international financial giants.
Second,Debt risk caused by high volatility in the U.S. Treasury market. In fact, the bond markets of most countries today are inextricably linked to U.S. Treasuries, similar to the relationship between global commodities and the U.S. dollar. For example, when the selling pressure of U.S. bonds is too high, the Fed will raise interest rates to retain investors, and if we want to issue bonds to raise funds, we must raise interest rates to compete with the United States.
Since the beginning of this year, the news of Evergrande's debt thunderstorm and urban investment debt "technical default" has continued to come out, and China's debt pressure should not be underestimated. Although the proportion of China's external debt is not high, the scale of external debt at the enterprise level is considerable, for example, the total external debt of Evergrande is close to 140 billion US dollars.
Appropriately increasing financial support for enterprises with relatively high debt stress to prevent them from unexpected situations due to rising debt costs will be the top priority for China's economy to ensure financial security in 2024.
China's sell-off of U.S. bonds is just a routine investment operation, and there is no need to understand this operation as "China wants to empty U.S. bonds." It is a fact that the United States froze the dollar assets of the big goose, but the huge scale between China and the United States determines that we don't have to learn the lesson of the big goose at all.
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