China not buying EFSF bonds out of kindness

By Peter Boockvar - October 26th, 2011, 2:05PM

The market is rallying on the story that China will buy bonds issued by the EFSF. This is not a surprise as they expressed interest back in January, http://www.irishtimes.com/newspaper/finance/2011/0126/1224288325350.html, and China is not doing this out of the goodness of their heart. EFSF is AAA rated paper (assuming France keeps theirs) and the diversification it provides the Chinese away from US Treasuries is much different than China saying they will buy Italian, Spanish or Portuguese debt directly. Thus, this basically is the more conservative way of investing in Europe. Japan has been buying EFSF since they were first issued.

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Category: MacroNotes.

Comments

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data, ability to repeat discredited memes, and lack of respect for scientific knowledge. Also, be sure to create straw men and argue against things I have neither said nor even implied. Any irrelevancies you can mention will also be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

2 Responses to “China not buying EFSF bonds out of kindness”

Mike in Nola Says:
October 27th, 2011 at 6:16 am
Probably more important to them is propping up the Euro so they can keep exporting to Europe.

Additionally, as long as they export to Europe, they will have Euros that have to be recycled into some sort of Euro denominated instruments, just as they have to recycle dollars into Treasuries.
waltclay Says:
October 28th, 2011 at 9:18 am
Help me – I’m not sure I fully understand. “Japan” the government has a debt greater than the nation’s gdp, but most of it is owed internally to individuals, firms, funds, etc. In principle the government can sell bonds internally to buy efsf, but I infer from what Mike says above that it is Japanese firms exporting to Europe which are interested in efsf. Right? So, who is “China”.