Global Shift: US Struggles, China Ditches $622B
The United States has always wanted to avoid its own crises by harvesting other countries.
But now countries have understood this routine and have prepared in advance, leading to the United States possibly being in vain this time.
01, Inversion, Recession
When we look back at the performance of various assets in 2022, we find a very meaningful phenomenon. The largest increase is the yield of 10-year U.S. Treasury bonds, but correspondingly, the price of U.S. Treasury bonds has suffered a large loss that has never been seen in decades.
In recent days, the yield of U.S. Treasury bonds has mostly fallen below 4%. The yield of 10-year Treasury bonds has slightly decreased, currently fluctuating around 3.8%, and the yield of 30-year U.S. Treasury bonds has also slightly decreased, fluctuating around 3.9%.
However, the decline in U.S. Treasury bond yields only means that the price of short-term U.S. Treasury bonds has slightly increased. In the long run, what needs more attention is that the inversion phenomenon of U.S. Treasury bonds has always existed. This also means that the United States entering a recession in 2023 is almost unquestionable.
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02, U.S. Treasury Bond Limit Exceeded
At the same time, after entering December, the balance of U.S. Treasury bonds has repeatedly reached the debt limit of 31.4 trillion stipulated by the U.S. Congress.
It is obvious that the U.S. Treasury has no intention of reducing the issuance of U.S. Treasury bonds, but is instead trying to promote the U.S. Congress to raise the limit of U.S. Treasury bonds again.
The fiscal deficit of the United States is still expanding. U.S. Treasury Secretary Yellen warns the market on one hand that U.S. Treasury bonds may collapse, but on the other hand, she has to issue more bonds to make ends meet.If the financial nuclear bomb of US debt is detonated, it will not only cause severe shocks to the US financial market but also to the global financial market.
Therefore, China has increased its efforts to sell US debt again.
After a slight increase in US debt in July and August, China began to sell US debt on a large scale in September and October, with a total of $62.2 billion.
03, Can't cut anymore
The US dollar has become a big problem in the global financial market. The rising inflation and the continuously rising US dollar index have led to a significant decline in the prices of various assets worldwide.
Countries such as Sri Lanka and Ghana have entered the predicament of bond defaults and national bankruptcy, but obviously, these small countries are not the main targets of the US dollar's harvest.
By the end of December, preliminary statistics showed that Turkey's currency fell by 40.8% for the year, ranking first. Egypt's currency also fell by 36%.
The Japanese yen also fell sharply, but after continuous market rescues, the annual decline of the yen was reduced to 15%. The offshore yuan rose sharply after November, and the decline was reduced to 10%. The euro exchange rate also showed a clear increase.
What is even more unexpected is that Russia's ruble rose by 8.7%, and the Brazilian real also rose by 7.3%, which is the most beautiful currency performance under the continuous interest rate hikes by the United States.
From this perspective, although the US dollar wants to start harvesting, it is obvious that it can no longer cut.04, Reasons for the Strong Renminbi
After a half-year decline from late April to the end of October, the Renminbi began a rebound of as much as 4,500 points starting in November. This is closely related to several factors.
Firstly, there is an ample supply of gold reserves. Our country has been continuously purchasing gold, providing sufficient credit support for the Renminbi.
Secondly, our trade surplus has been expanding. Some netizens even joked that our trade surplus is so large that we could share a part with Russia, as the trade between China and Russia is in deficit. Therefore, netizens understand that a small portion of China's huge trade surplus has flowed into Russia.
The third reason comes from our country's low inflation. This makes our Renminbi bonds in a substantial positive yield range, which is very attractive in the international capital market, attracting overseas funds to continuously buy in.
We can compare this with U.S. Treasuries. Currently, the yield of 10-year U.S. Treasuries is about 3.8%, but the current inflation in the United States is as high as 7%. Holding 10-year U.S. Treasuries means a negative yield of more than 3.2%, so U.S. Treasuries are unattractive and have been heavily sold by central banks around the world.At the same time, however, Renminbi-denominated bonds are being sought after by an increasing number of countries.
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