EE.UU hits Chinese bank
BANK ;Some economists argue that the current pace, most of the securities of foreign banks could be sold within just three months.
According to the latest data from the Federal Reserve in the first week of 2016 foreign central banks sold US government bonds worth 12.000 billion and over the next week they got rid of 34,500 million dollars in bonds, which is “the worst start to the year in history,” according to the Vestifinance portal.
As a result, the total amount of US bonds in the coffers of foreign central banks decreased to 2.962 billion dollars, the lowest level since April 2015.
Meanwhile, the weekly decline was the biggest since China began liquidating their reserves of Treasuries by mid-2014.
As noted by the portal, the current trend “is not surprising” because due to high volatility and crisis in many developing
economies,central banks are forced to sell dollar assets in order to stabilize the situation national currency or stock markets.
The role of China
Apparently, China, which continues to sell bonds US government plays an important role in this dynamic.
In this regard, many economists explain the drastic falls are related exclusively to the sale of assets by the Bank of China, followed by other Asian central banks.
Meanwhile, other experts point out that although it may not underestimate the importance of the actions of China, the trend has been established for almost all foreign banks are selling bonds. “This makes sense because currently many currencies are falling against the US dollar and regulators are trying to contain this fall,” says the article Vestifinance.
Are we witnessing a “great shock”?
In this situation, the questions that arise are: how long will this active sale of US bonds? How long will the reserves of countries, especially those of China? “Some economists argue that the current pace, most of the securities of foreign banks can be sold in just three months,” the website to warn that “will be a big shock.”
“On the one hand we have China, which will spend a lot of money to curb capital record output, but still have to allow its currency to float freely, which will only worsen the situation,” he explains Article.
“On the other hand, it is unclear how this will affect the US Treasuries and profitability,” concludes the text.
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