Nice Bet China

[DcifrThs]

[ QUOTE ]
I think you need to read this:

Bloomberg Article

In particular:

[ QUOTE ]
China Investment

China Investment Corp., which manages the nation's $200 billion sovereign wealth fund, said last month it may get more of the nation's reserves to invest. The company, established in September, will use about $67 billion to buy shares in the Agricultural Bank of China and China Development Bank, Li Yong, China's vice finance minister said at the conference. It will invest another one-third of its assets in financial markets.


[/ QUOTE ]

That is implying they will balance not by selling dollars and buying Euros and other "strong currencies", but rather by reducing their dollar reserves by inveting them.

So it would be incorrect to assume (as it seems much of the public has done because they didn't take time to understand the statements and instead jumped to the conclusion that it meant China selling $ and buying other currencies) that "balancing" necessarily means swaping reserves in one currency for another. It could just mean (and reading the actual statements it likely does mean) that they will be holding less dollars, but they will do so by investing them.

Also, I think it actually is very good for the dollar to do this. The more dollars invested in the Chinese system means the more dependent their system becomes on the dollar (thus dumping it would hurt them even more).

I think basically that a lot of people are morons, saw the headlines and said "zomg! te chinese are going to throw all their dollars into the marketplace!"

[/ QUOTE ]
the big news should be what the 10yr will do [img]/images/graemlins/smile.gif[/img]

Barron

[tippy]

Nice post CrushinFelt.

I love this part, LOL:

``Cheng has a history of speaking out on a range of financial market and economic developments and his comments are not always accurate,'' said Glenn Maguire, chief Asia economist at Societe Generale SA


While his comments make a little more sense in context of this article, it still doesn't seem like a smart line given the massive dollar holdings that China still has.

Seems like Mr. Cheng needs a good PR man...

[CrushinFelt]

[ QUOTE ]
[ QUOTE ]
I think you need to read this:

Bloomberg Article

In particular:

[ QUOTE ]
China Investment

China Investment Corp., which manages the nation's $200 billion sovereign wealth fund, said last month it may get more of the nation's reserves to invest. The company, established in September, will use about $67 billion to buy shares in the Agricultural Bank of China and China Development Bank, Li Yong, China's vice finance minister said at the conference. It will invest another one-third of its assets in financial markets.


[/ QUOTE ]

That is implying they will balance not by selling dollars and buying Euros and other "strong currencies", but rather by reducing their dollar reserves by inveting them.

So it would be incorrect to assume (as it seems much of the public has done because they didn't take time to understand the statements and instead jumped to the conclusion that it meant China selling $ and buying other currencies) that "balancing" necessarily means swaping reserves in one currency for another. It could just mean (and reading the actual statements it likely does mean) that they will be holding less dollars, but they will do so by investing them.

Also, I think it actually is very good for the dollar to do this. The more dollars invested in the Chinese system means the more dependent their system becomes on the dollar (thus dumping it would hurt them even more).

I think basically that a lot of people are morons, saw the headlines and said "zomg! te chinese are going to throw all their dollars into the marketplace!"

[/ QUOTE ]
the big news should be what the 10yr will do [img]/images/graemlins/smile.gif[/img]

Barron

[/ QUOTE ]

yup... seems to be lots of activity building there

[tippy]

"Poole says FED will not raise rates at the December meeting"

This certainly seems like an odd statement coming from Poole. Was there any need to say this, or is it a preemptive suggestion?

[CrushinFelt]

[ QUOTE ]
"Poole says FED will not raise rates at the December meeting"

This certainly seems like an odd statement coming from Poole. Was there any need to say this, or is it a preemptive suggestion?

[/ QUOTE ]

it's a way to combat the falling dollar

[DcifrThs]

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
I think you need to read this:

Bloomberg Article

In particular:

[ QUOTE ]
China Investment

China Investment Corp., which manages the nation's $200 billion sovereign wealth fund, said last month it may get more of the nation's reserves to invest. The company, established in September, will use about $67 billion to buy shares in the Agricultural Bank of China and China Development Bank, Li Yong, China's vice finance minister said at the conference. It will invest another one-third of its assets in financial markets.


[/ QUOTE ]

That is implying they will balance not by selling dollars and buying Euros and other "strong currencies", but rather by reducing their dollar reserves by inveting them.

So it would be incorrect to assume (as it seems much of the public has done because they didn't take time to understand the statements and instead jumped to the conclusion that it meant China selling $ and buying other currencies) that "balancing" necessarily means swaping reserves in one currency for another. It could just mean (and reading the actual statements it likely does mean) that they will be holding less dollars, but they will do so by investing them.

Also, I think it actually is very good for the dollar to do this. The more dollars invested in the Chinese system means the more dependent their system becomes on the dollar (thus dumping it would hurt them even more).

I think basically that a lot of people are morons, saw the headlines and said "zomg! te chinese are going to throw all their dollars into the marketplace!"

[/ QUOTE ]
the big news should be what the 10yr will do [img]/images/graemlins/smile.gif[/img]

Barron

[/ QUOTE ]

yup... seems to be lots of activity building there

[/ QUOTE ]
two positions i've noted lately that i'm strongly for are:

1) long 2 yr short 10 yr (duration adjusted)
2) long 10yr TIP short 10yr nominal (duration adjusted)

i.e. yield curve steepener and long BEI.

[img]/images/graemlins/smile.gif[/img]

Barron

[CrushinFelt]

I'm not sure I know what number 2 entails exactly

Probably too late for number 1 as the two year is already going/has gone nuts

[DcifrThs]

[ QUOTE ]
I'm not sure I know what number 2 entails exactly

Probably too late for number 1 as the two year is already going/has gone nuts

[/ QUOTE ]

in terms of the steepener, yea it is already close to 80bps (i came into it when it was 40bps)...so might not want to start the position now. i'd be reducing it since signal went down as a result of the latest market movement.

short innacurate version for long BEI:

buy 1 unit of 10yr TIPS
short (either in reverse repo or short futures) 8.5/7.5 units of US 10yr

Barron

[lozen]

Do you think the world sees a Defecit that is out of control and a country stuck in a war for years to come driving this defecit higher. Also an economy that is weakoning day by day. China sees itself as the new world power and is testing its influence on the market.

[xxThe_Lebowskixx]

you think interest rates are going up? that is the opposite of what ive seen and read pretty much everywhere.