China Airs Inflation Concerns; Wants Protection

Will China continue to fund the U.S. deficit? What would happen to interest rates if China exited our U.S. Treasury market? Where would the United States attract the necessary funds? This dilemma has been one of the most widely debated topics in financial markets.

On the heels of the U.S.-China economic summit held last week in Washington, a story is now seeping into the market that at the behest of the Chinese, the U.S. Treasury will increase issuance of Treasury Inflation Protected Securities (TIPS). The Wall Street Journal reports, U.S., in Nod to China,to Sell More TIPS. This story gives us a lot of food for thought, including:

1. how quickly do the Chinese think inflation may rear its ugly head?

2. do the Chinese have a lack of confidence in Ben Bernanke specifically or the Federal Reserve in general?

3. how high do the Chinese think inflation may rise?

4. will we continue to witness Chinese officials calling for a move away from the U.S. dollar as the international reserve currency?

5. could we envision the U. S. Treasury executing the sale of TIPS on a private placement basis to the Chinese?

Who knows how this scenario will play out. For our purposes, the fact that our largest creditor is looking for inflation protection speaks volumes.

If the Chinese are concerned about inflation, then I am as well.

About Larry Doyle 522 Articles

Larry Doyle embarked on his Wall Street career in 1983 as a mortgage-backed securities trader for The First Boston Corporation. He was involved in the growth and development of the secondary mortgage market from its near infancy.

After close to 7 years at First Boston, Larry joined Bear Stearns in early 1990 as a mortgage trader. In 1993, Larry was named a Senior Managing Director at the firm. He left Bear to join Union Bank of Switzerland in late 1996 as Head of Mortgage Trading.

In 1998, after 15 years of trading and precipitated by Swiss Bank’s takeover of UBS, Larry moved from trading to sales as a senior salesperson at Bank of America. His move into sales led him to the role as National Sales Manager for Securitized Products at JP Morgan Chase in 2000. He was integrally involved in developing the department, hiring 40 salespeople, and generating $300 million in sales revenue. He left JP Morgan in 2006.

Throughout his career, Larry eagerly engaged clients and colleagues. He has mentored dozens of junior colleagues, recruited at a number of colleges and universities, and interviewed hundreds. He has also had extensive public speaking experience. Additionally, Larry served as Chair of the Mortgage Trading Committee for the Public Securities Association (PSA) in the mid-90s.

Larry graduated Cum Laude, Phi Beta Kappa in 1983 from the College of the Holy Cross.

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