US Treasury gives China direct access to buy US Bonds
In June 2011 the US Treasury Department granted the Chinese government direct-bidder status to purchase US Treasuries direct from the US government.
All other central banks must purchase US Treasuries through primary dealers on Wall Street, which then place bids on their behalf at Treasury auctions.
The People’s Bank of China holds roughly $1.2-T in US debt, more than any other entity, and it is now the 1st foreign government with direct computer access to the US government Treasury auction process. But, China must sell US Treasuries on the open market, this is a big deal because the Chinese are getting very special treatment from Tim Geitner.
This special treatment does have the potential to save the Chinese government money, but not in transaction and commission costs because primary dealers are prohibited from charging its bidding customers fees.
Here is the reason: China may be getting a better deals by keeping its purchases from Wall Street secret.
Not only is China the largest US creditor, it is the largest exporter to this country. The US-China trade deficit widened to $51.8-B in March up from $45.8-B in February, growing at the fastest pace in the last 10 months, according to the US Commerce Department.
“Unfortunately, by failing to address Chinese mercantilism and resulting trade deficit with China, the United States is getting too deeply in debt to the Middle Kingdom, granting it special status at Treasury is another example of the policy of appeasement, pursued by US President Obama.”
The change in US-China policy was not disclosed publicly and only discovered recently. But this non-disclosure is not unusual, according to the US Treasury.
Direct bidding is open to a wide range of investors, but as a matter of general policy we do not comment on individual bidders,” according to a US Treasury spokesperson.
In order to accommodate China, the US Treasury Department had to upgrade its computer system to avoid hacking attempts.
In a phone conversation with Treasury’s spokesperson, when asked to confirm whether any other government has similar access or about how this change in policy developed, he reverted to Treasury’s aforementioned statement.
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Paul A. Ebeling, Jnr.
Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster’s Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.
Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.
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