So About China and The Fed Offloading Those T-Bills

The Fed is hitting the hammer on inflation and to get to 2% inflation they are making some big moves.

  • Treasuries at The Fed have reduced from over $6 trillion to $5.6 trillion
  • China dumping US Treasuries (total holdings near ~$1 trillion) to defend Yuan against the US Dollar (current exchange rate 7.3 Yuan per $, an increase of 14% over the beginning of the year)
  • The Bank of Japan is friendly with the US, but as the second highest foreign owner of US Treasuries after China they may have to sell with their own inflation/currency woes.

Jennifer Lamar of Diamond Nest Egg is debating switching from a 13-week to a 17-week ladder buy strategy. She is adamant on not selling her T-Bills before maturity. For a 3-4% interest rate this is a great way to deploy capital short term in a relatively (for the patient) liquid state.

Could the liquidity situation in the Treasury market get worse? Yes. Could it get much worse even? Possibly.

Jennifer Lamar November 2022

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There are a lot of places to "park" money. I feel some people get so laser focused on single asset class with either a willful ignorance or just ignorance. I hope it is the latter. The best free lunch is picking from all the baskets, I'm paraphrasing some billionaire who wants to eat your lunch so let's just dig into this already.