In 2021, the great power tug-of-war continues unabated, and the subtlety lies in the movements of the world’s top 3 economies! The latest data from the U.S. Treasury Department shows that the increase in foreign purchases of U.S. Treasury bonds in January was the highest in six months, with a total increase of nearly $49 billion, of which China and Japan both bought more than $20 billion, the former’s debt holdings returned to a high in October 2019, the latter is closer to a historical record. This reflects that China and Japan are calculating Biden‘s succession to the U.S. presidency after the situation is favorable to them, and now look back on it just predicts the future deadlock is difficult to break!
The outside world interpreted this Time China and Japan to increase their holdings of U.S. debt, is optimistic that the Biden Administration will launch a sky-high bailout plan, and then favorable U.S. economic growth, coupled with rising debt interest rates to enhance the attractiveness of U.S. debt. However, the fact is that in January this year, reflecting the overall financing costs of the U.S. 10-year Treasury yield only from 0.917% at the beginning of the month, rose slightly to about 1.094% at the end of the month, and then soared to more than 1.6% simply can not be compared. Moreover, in addition to China and Japan, the two major debtors, the third largest creditor of the United States, the United Kingdom, in January is to reduce its holdings of U.S. debt 1.9 billion U.S. dollars; Ireland, ranked fourth, also reduced its holdings of 4.5 billion U.S. dollars; the fifth place, Luxembourg is selling 6.3 billion U.S. dollars. If the U.S. economic outlook is really good, why are three of the top five debtors reducing their holdings?
The main event in January is the U.S. presidential transition, not to the 20th of the month to officially hand over the baton, the market is not 100% sure that the former President Trump will easily abdicate. Coincidentally, since the smooth handover, Hong Kong‘s financial markets were then blessed with “northern water” and the stock market boom once set off a huge wealth effect, which suddenly made people forget the pain of the Epidemic, and the political vision behind it speaks for itself. Admittedly, for China, Biden’s inauguration reflects the Sino-US dilemma into another page, with the global economy last year, the two sides may have room for cooperation, it is only natural to buy some US debt to show goodwill.
As for Japan, it is also calculating its own interests! Although Trump claims to crack down on the Chinese Communist Party, but also in the U.S.-Japan trade, especially forcing Japan to open up its agricultural market, how can The Japanese government not avoid. But Biden has repeatedly stressed the need to unite with “allies” to contain the Chinese Communist Party, so Japan has hope, and may even take advantage of the situation to regain the second largest economy in the world, plus Japan has not been able to get rid of negative interest rates for a long time, rather than a capital trap, it is better to bet heavily on buying U.S. debt, to prove to others that it is a “community of Destiny “, come more effective.
To sum up, the huge increase in U.S. debt in January is the result of China and Japan pushing and helping to make the Biden administration read the situation, the so-called cooperation is two benefits, the fight is hurt. If not, with mainland financial officials openly believe that the financial markets in Europe and the United States and other burst pot of thinking, will not rashly increase holdings. Investors may wish to continue to pay attention to the changes in the U.S. debt position in February, as long as one side of China and Japan have a significant reduction in holdings, will know who no longer buy Biden’s account, the situation will be clearer power wrestling.
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