Did China Really Unload 97% of Its Treasury Debt?
pic credit: Banksy
The key word here is short-term debt. Despite what the Zero Hedge comment section might tell you, China did not unload 97% of its Treasury debt. Surely you would notice if they did. With $1.2 trillion (roundabouts) in worthless pieces of paper under China's mattress, that's not a transaction that can go down without a little indigestion and/or explosive diarrhea on our part.
Here's the real story (NASDAQ):
According to a Treasury Department report, China has reduced its ownership of short-term U.S. Treasury bills by 97%, falling from a peak of $210.4 billion in May 2009 to only $5.69 billion in March 2011! Additionally, since October 2010, China has also been divesting its long-term Treasury bonds holdings. Clearly, China does not like to see an eroding U.S. dollar on top of extremely low interest rates. This is raising even more speculation about what will happen when the Fed ends its second round of quantitative easing (QE2) later this week. Who will buy Treasury bonds after the Fed ends its bond-buying spree?
What does this mean? Well short-term implies an original maturity of one year or less, so the debt expired. Big whoop?
The big whoop here is that we managed to scrape together $204 billion to give them.