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Two Ways: China Sweats US Treasuries


Strengthen your portfolio in good times and bad.

Chinese Premier Wen Jiabao voiced concern over his country's holdings of US Treasury bonds Friday. Speaking at a conference, he said the country has "lent a huge amount of money to the United States" and that he "requests the US maintain its good credit, to honor its promises and to guarantee the safety of China's assets." This according to Bloomberg.

When asked about the Premier 's remarks, Lawrence Summers, White House National Economic Council Director, said Treasuries would be hurt without the steps being taken by the administration to protect the US economy. China is more or less funding the recently signed $787 billion stimulus package.

Treasuries initially fell after the comments, but did recoup their losses later in the day. Yields on the benchmark 10-year Treasury Note rose to 2.96% from 2.85% yesterday. Yields were around 2.83% at midday.

For context, see Toddo's Wishbone World.

From the Bull Pen: With all the currency battles taking place, bulls can simply look to the Gold ETF (GLD); a sell stop in the near term can be set below $90.

From the Bear Cave
: If China were to begin selling its massive inventory of US Treasury Bonds, one could expect the Ultrashort 20+ Year T-Bond ETF (TBT) to benefit. But don't expect the Fed to sit idly by, so careful when playing this leveraged ETF.

Faceplant! It's been an exhausting week, but I hope a good one. Have a great weekend!
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No positions in stocks mentioned.

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