US assures China on debt quality

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A world gone mad!

When China’s US securities mature, the Fed debits their securities account at the Fed and credits their bank account at the Fed.

What’s the fuss???!!!

Treasuries Fall as Stocks Rise, China Comments on Debt Safety

by Susanna Walker

Mar 13 (Bloomberg) — The Obama administration sought to ease Chinese Premier Wen Jiabao’s concern about U.S. government debt, reiterating pledges to cut the budget deficit in half in four years.

“There’s no safer investment in the world than in the United States,” White House Press Secretary Robert Gibbs said today.

Wen earlier said that China, the U.S. government’s largest creditor, is “worried” about its holdings of Treasuries and wants assurances that the investment is safe. “I request the U.S. to maintain its good credit, to honor its promises and to guarantee the safety of China’s assets,” he said at a press briefing in Beijing.

Wen’s words contributed to a decline in Treasuries, before the losses were recouped. Yields on benchmark 10-year notes rose as high as 2.96 percent, from 2.85 percent late yesterday, and were at 2.87 percent at 3:17 p.m. in New York.

White House National Economic Council Director Lawrence Summers, asked today about Wen’s remarks, said overseas “confidence” in Treasuries would be hurt without the administration’s steps to end the economy’s decline.

President Barack Obama is relying on China to sustain buying of Treasuries amid record amounts of debt sales to fund a $787 billion stimulus package. China held $696 billion in U.S. Treasury debt as of Dec. 31, more than Japan’s holdings of $578 billion. The total foreign holdings of U.S. Treasury debt at the end of last year was $3.1 trillion.

Treasury’s Response

The Treasury also offered a response that sought to reassure investors.
“The U.S. Treasury market remains the deepest and most liquid market in the world,” Treasury spokeswoman Heather Wong said in an e-mailed statement. “President Obama is committed to taking the steps necessary to restore growth and put this country on the path of fiscal sustainability, including cutting the long- term deficit in half over the next four years.”