Geithner comments maul Treasuries
Treasuries are selling off this morning after Treasury secretary nominee Geithner told Congress that the Obama administration believes China is manipulating its currency. China, a key financier of the United States' budget and trade deficits, owns hundreds of billions in Treasury securities. The short-term fear is that a piqued China will dump Treasuries to demonstrate its displeasure. The long-term fear is that China will actually stop manipulating its currency, which has kept U.S. interest rates low, inflation low and Chinese goods cheap.
The yield on the 10-year note (which moves inversely from the price) is up to 2.65 percent this morning. The yield on the 30-year bond popped from 3.22 percent to 3.36 percent.
Comments
Manipulation of financial markets ALWAYS have major ramifications.
By maipulating their currancy, China added to the US Housing Bubble because low interest rates fueled the fire. We borrowed China's huge surplus at low interest rates and this brought America to it knees.
Posted by: Tangito | January 23, 2009 11:38 AM
Isn't this the pot calling the kettle black? The US dollar has been manipulated by the Fed raising and lowering interest rates, as well as the increases in minimum wage. As long as the US govt keeps printing more money than they can back up with actual funds there is no room for making such comments about foreign monetary policies.
Posted by: Andrew | January 23, 2009 2:51 PM
"The Capitalists will sell us the rope with which we will hang them." -Vladimir Ilyich Lenin (c 1910)
Updated version:
"The Capitalists will borrow the money to buy the rope from us with which we will then use to hang them."
Posted by: MrRational | January 23, 2009 4:24 PM
Japan "manipulates" its currency as much as the Chinese do, since Japan has about the same amount of T-bills in its possession.
Besides, our stimulus plan calls for raising cash through selling yet more T-bills, and who's gonna buy them? That's right, the Chinese. So, is it really wise for Tim to antagonize our Chinese bankers just when we need them the most?
Posted by: Bo | January 24, 2009 6:16 PM