Black Shoots: China Debt Sale Fails
Courtesy of Karl Denninger at The Market Ticker
The media is almost-entirely ignoring this little piece of nasty news:
July 17 (Bloomberg) — China’s finance ministry failed to meet its debt-sale target for a third time in two weeks at a 182- day bill sale, according to traders at Galaxy Securities Co. and China Citic Bank in Beijing. The ministry had tried to sell 20 billion yuan of bills and only sold 18.51 billion yuan, traders said. The average yield for the bills sold was 1.6011 percent, they said.
Here’s the problem – The Chinese, if unable to fund their operating expenses with debt sales, will be forced to sell something – like US Treasuries – to do so.
These failed auctions have also come with fairly significant "tails", or increased interest coupon demands from the buyers. This in turn is a clear statement by the buyers that interest rates are too low.
Feel that squeeze yet, Mr. Chinaman? This is the push-back from the "stimulus" and "easy money" policy, and it is now showing up in China.
One way or another this winds up hurting, and if the Chinese start to sidle toward the door with their Treasuries, it could hurt over here in the United States hard and fast.
Photo: Shanghai China, at Wikipedia.
