Another Failed China Auction

Sure, China will keep buying our Treasuries. NOT!

Below is an article on a failed government debt auction in China, and it is not the first.

The entire developed world is in the same condition as the US. All countries need government financing to pay for the deficits they have run up to try to overcome the economic slow-down. There is not enough funding to meet government demands without creating additional money. Liquidity is being created worldwide. It eventually will translate into inflation.

Regarding China, they may be the next bubble. If so, look for them to stop buying US treasuries and perhaps even sell some/much of what they currently hold.

All of this is bad for the US, its ability to finance its deficits and the US dollar.

Thursday, April 8, 2010 – 23:56

China MOF T-Bill Auctions Fail Due MonPol Tightening Concerns

BEIJING (MNI) – Concerns about moves to tightening monetary policy hit China’s primary bond market Friday, with the Ministry of Finance unable to sell all of its planned issuance of 91- and 273-day bills.

Traders said that the CNY15 billion offering of 91-day bills attracted bids totaling just CNY14.25 billion while the ministry was only able to sell CNY17.47 billion of the CNY20 billion in 273-day paper that it originally planned to auction.

The results of the auction also came in above expectations, with the 91-day paper selling at 1.2757% versus the 1.2374% quoted on Thursday and the 273-day bills going for 1.5418% versus Thursday’s indicated 1.526% yield.

Market jitters about tightening rose following the reintroduction of three-year sterilization paper sales by the People’s Bank of China on Thursday. The three-year notes will lock up more interbank market liquidity for longer periods.

In addition, the New York Times reported Thursday that the government could allow the yuan to strengthen against the dollar as early as next week to counter domestic inflation.

beijing@marketnews.com ** Market News International Beijing Newsroom: 86-10-5864-5274 **