• 717 days Will The ECB Continue To Hike Rates?
  • 717 days Forbes: Aramco Remains Largest Company In The Middle East
  • 719 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 1,119 days Could Crypto Overtake Traditional Investment?
  • 1,124 days Americans Still Quitting Jobs At Record Pace
  • 1,125 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 1,129 days Is The Dollar Too Strong?
  • 1,129 days Big Tech Disappoints Investors on Earnings Calls
  • 1,130 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 1,131 days China Is Quietly Trying To Distance Itself From Russia
  • 1,132 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 1,136 days Crypto Investors Won Big In 2021
  • 1,136 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 1,137 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 1,139 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 1,139 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 1,143 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 1,144 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 1,144 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 1,146 days Are NFTs About To Take Over Gaming?
How The Ultra-Wealthy Are Using Art To Dodge Taxes

How The Ultra-Wealthy Are Using Art To Dodge Taxes

More freeports open around the…

Is The Bull Market On Its Last Legs?

Is The Bull Market On Its Last Legs?

This aging bull market may…

  1. Home
  2. Markets
  3. Other

China Potentially Threatens a Near Term Us Treasury Short Squeeze!

China may trigger US Bond short squeeze

Problems in China are looming on top of an already very tenuous and misunderstood situation in the US Financial Markets. Additionally, Federal Reserve Policy has made the situation even more combustible!

As a result of a Trump Victory inspired bond market massacre there are now few places that a yield starved world can presently find better risk-adjusted yields than in US Treasuries. With China now being forced to sell their FX Reserves and thereby creating  the much needed supply so eagerly craved by foreign investors, it is also further depleting an already restricted EuroDollar pool required to buy this supply. There are consequences of this combination of shifting global parameters.

The Obama administration had been quite successful in orchestrating and limiting Treasury supply, thereby assisting the Fed in driving yields lower! That is all potentially about to rapidly change. In fact, the match may have already been lit!


An Extremely Tenuous Situation

Though US Bond Yields are likely to head higher later in the year as Trumponomics unfolds, there are some serious and unexpected imbalances to be corrected in the near term.

The imbalances have all the ingredients for a short squeeze which triggers a classic "rotation".

Russell 2000, VIX and 10-Year Treasury


Presently Being Made Much Worse By Fed Policy!

In A NIRP World (~$12t)

The Risk-Adjusted, Dollar Denominated Us Treasury Has Suddenly Become The Holy Grail!

Interest Rates

Major Holders ofbTreasury Securities

Meanwhile Money Is Fleeing China Anyway It Can - Despite Futile Capital Control Attempts.

Bitcoin Denominated in Chinese Yuan

USD/CNY


China Is Trapped and is Now Being Forced To Sell Us Fx Reserves

Reserve requirements are lowered alongside falling FX reserves. These are coordinated in order to mitigate negative effects from changes in the domestic money supply.

China FX Reserves


China's Mercantile, Export Lead Strategy May Have No Other Way Out in The Near Term!

Widening Credit Gap

You may want to read a more technical analysis we recently published entitled: A Broken Bond Bounce Beckons!

 


Signup for notification of the next MATASII Macro Insights

 

Back to homepage

Leave a comment

Leave a comment