China's Back To Financing America's Debt And It's Already Been A Great Trade

Geithner China

For a few months it seemed as if China’s willingness to keep financing U.S. debt was waning.

Markets worried that U.S. borrowing costs would spike if America’s number one creditor stopped playing ball. Remember talk about China potentially diversifying its reserves into the euro?

Obviously the euro-as-reserve-currency meme has been dying over the last few weeks, but it’s time to stick a fork in it. There’s only one primary contender left, and China’s coming back to it:


China became a net buyer of Treasurys for the first time since last September, with its holdings increasing $17.7 billion to $895.2 billion, following net sales of $11.5 billion in February, according to the monthly Treasury International Capital report, known as TIC.

A Treasury sell off by China at the end of last year caused concern at first that the largest creditor nation to the U.S. was shifting out of U.S. assets. But major upward revisions to the December data in late February showed that China hadn’t actually lost its position as top Treasury holder to Japan, as initially thought.

Looks like they made a decent trade so far, on their new March money. March was right before Treasuries rallied, sending yields down from 4% to 3.44% now.


Why treasuries might still be a good deal even at 3.44% >

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