Concerns grow over China's sale of US bonds

It's hard to know exactly what China, or any central bank, is doing. They speak of transparency, but tend to become opaque over important issues such as data, money flows, and transactions. If China was a marginal seller, they are certainly shrewd enough to keep their intentions secret. Tipping one's hand only serves to damage the value of what's left on the balance sheet.

Still, the increased speculation and chatter about the TIC flows cannot be completely dismissed. As rumors of Chinese selling spread, the percentage of competitive bids from direct bidders (anonymous bidders) during treasury auctions has moved higher across the yield curve since onset of the crisis.

Since very few coincidences exist in the financial markets, these observation lead many to conclude that "where there is smoke, there's bound to be fire."

A front-page story in the state’s China Information News said the record $34bn sale of US bonds in December was a "commendable" move. The article was republished by the National Bureau of Statistics, giving it a stronger imprimatur.

Source: telegraph.co.uk