I suspect the actual mechanism would be to simply allow bills, notes and agencies to mature and then not to roll them over, as oppose to a "dump". As you say, the later would really be pumped up as an act of "bad faith" by the Ministry of Truth US branch apparatchaks. However, simply allowing them to mature wouldn't require any act or a trade at all. I'm rather shocked at how much of these recent auctions involve rollovers of FCB holdings too. The US has a tough sales job to keep FCBs in the rollover game, and many of these are going off, without full recommitments. (*)
To answer Mish's question of when,
Message 21387945
I think there is plenty of evidence already that the Chinese aren't adding to their Old Maid Card stash, and may already be diverting excess USD from trade surpluses into commodities. I find the recent oil rally VERY interesting, because it hardly involved funds and speculators at all.
futuresemail.com
Maybe the Chinese used the recent dip to strike hard? The second step, not showing up at auctions for rollovers, may be under way at the margins already.
Chinese CB Treasury holdings, source flow of funds:
Nov. 2004: 220.2
Dec. 2004: 222.9
Jan. 2005: 223.5
Feb. 2005: 224.9
March. 2005: 223.5
(*) Source Wall Street Examiner professional (subscriber edition)
wallstreetexaminer.com
On Tuesday May 31 the Treasury auctioned $17,000 million in 13-week and $15,000 million in 26-week Treasury bills totaling $32,000 million to refund an estimated $38,009 million of publicly held 13-week and 26-week Treasury bills maturing June 2, 2005, and to pay down approximately $6,009 million. The issue date will be Thursday, June 2.
The 13 week bill auction went off at 2.935% (vs. 2.895 last week) with an average bid to cover of 2.07 (vs. 1.98 last week). FCBs took down $4.27 billion (versus $4.16 billion last week) of the $17 billion ($17 billion last week). Foreign central banks hold $4.88 billion of the maturing 13 week bills. FCBs decreased their holdings in this round by $610 million.
The 26 week bill auction went off at 3.11% (vs. 3.07 last week) with a bid to cover of 2.04 (vs. 1.95 last week). FCBs took down $4.57 billion (vs. $5.1 billion last week) of the $15 billion ($15 billion last week). Foreign central banks hold $6.1 billion of the maturing 26 week bills. FCBs cut their holdings by $1.53 billion. |
