It is speculated that China may dump more of its U.S. treasuries because of the current tensions between China and the United States. China currently holds $1.07 trillion dollars worth of U.S. treasuries.
China has been unloading some of their treasuries throughout the 2020 year, but that does not necessarily mean that they will unload their “whole deck of cards”. If China were to use the “nuclear option” in unloading their treasuries; the global markets would react haphazardly to such a scenario. -SB
1) Sales of homes in the U.S. have dropped their biggest drop in nearly 10 years, because of the coronavirus crisis in April. The upending of the labor market and the broader economy has undercut demand for housing. Sales of existing homes have plunged 17.8% with existing home sales making up about 90% of U.S. home sales. In addition, April showed a record collapse in homebuilding and permits. With unemployment up past 38 million people and still climbing, it’s expected the home sale market will remain depressed for long after the pandemic crisis is over. The problem is further exasperated by a four month inventory of homes where a six to seven month supply is considered a healthy balance between supply and demand.
2) More contraction of consumerism with more retailers announcing closing of stores. The retailers Victoria’s Secret and Bath & Body Works will be permanently closing about 300 stores in America and Canada. With the young people of America having fewer good job opportunities and less disposable income, the hyper-consumerism economy born in the seventies is finding it harder to sustain itself, raising questions of what economic model might replace the present one . . . and what the job future would be for the young.
3) Companies have been borrowing at a rampant pace to shore up their liquidity during the pandemic. The wireless carrier AT&T is joining in with a new bond sale of $12.5 billion dollars of unsecured bonds in five parts. The intent is to take advantage of a global rally in credit to refinance their outstanding debt. Their 40 year security has a yield 250 basic points over the Treasuries. In the last few years, AT&T has been reducing its debt of nearly $200 billion dollars now down to $164 billion dollars, most of the debt coming from its acquisitions of Time Warner Inc and DirectTV.
4) Stock market closings for – 22 MAY 20:
Dow 24,465.16 down 8.96 Nasdaq 9,324.59 up 39.71 S&P 500 2,955.45 up 6.94