While we admit that “suddenly” is not exactly the right word to describe China’s selling of US Treasurys, which has been steadily liquidating its UST reserves over the past two years, something changed today, when in a violent move starting around the time of the Trump election was guaranteed after midnight, the offshore Yuan, the CNH, has been a one way street of non-stop selling, indicative however, of much more than just the relative strength of the dollar.
In fact, as the chart below shows, the selling in the Yuan appears to be closely correlated to today’s unprecedented liquidation in US Treasurys…
… which in turn, have seen their biggest absolute jump in yields since the Taper Tantrum in 2013, and the biggest percentage jump in yield on record.
Some context for today’s yield move, which as we noted earlier when we described today’s “deplorable” 10Y auction, suggests that the Bond Vigilantes, or at least Beijing, are not big fans of Donald Trump at all.
If this is indeed how China plans on “celebrating” the Trump presidency, namely by liquidating billions in US Treasurys on a daily basis, something we have already observed take place for months thanks to the Fed’s custody holdings although on a much smaller scale…
… then the financial advisors of the billionaire real-estate mogul are about to be very, very busy. And we certainly can’t wait to see how China – in turn – will respond to the inevitable tarrifs, anti-dumping duties and taxes that Trump will retaliate with, and how long before the trade war escalates into something more kinetic
Thanks to John de Rothschild at the CONtrail for this item.