Reuters: China can now bypass Wall Street when buying U.S. government debt and go straight to the U.S. Treasury, in what is the Treasury's first-ever direct relationship with a foreign government. This means the People's Bank of China buys U.S. debt using a different method than any other central bank in the world. China is preserving the value of specific information about its bidding habits. By bidding directly, China prevents Wall Street banks from trying to exploit its huge presence in a given auction by driving up the price.
It is one of several courtesies provided to a buyer in a class by itself in terms of purchasing power. Although the Japanese, for example, own about $1.1 trillion of Treasuries, their purchasing has been less centralized. Buying by Japan is scattered among institutions, including pension funds, large Japanese banks and the Bank of Japan, without a single entity dominating.
Granting China a direct bidding link is not the first time Treasury has gone to great lengths to keep its largest client happy. |