Source's T-ETCs are collateralised with US Treasury Bills
and the swaps are diversified across multiple counterparts.
Over the past six months the spread between 30Y Russian bonds and US Treasury Bills
has contracted 102 bpts.
China's buying of dollars and US Treasury bills
is financing the US deficit at a time when manufacturers in developed countries are looking for a boost from a more competitive dollar against the yuan.
When Lehman Brothers collapsed in October 2008 and the world economy seemed to be on the brink of meltdown, every asset except US Treasury bills
and gold appeared to carry too much risk; the chance of any reward seemed slim.
China, as the largest holder of US Treasury bills
, has been very cautious about the proposals for diluting dollar dominance.
Floating exchange rates were supposed to prevent countries from manipulating their currencies, but, by accumulating large quantities of US treasury bills
, East Asian countries, especially China, kept their exchange rates artificially low.
The kingdom had amassed foreign assets of more than $500bn, and this year more than 50% of its oil revenues were being invested in foreign assets, mainly US Treasury bills
, because it could not spend the petrodollars domestically, a Saudi adviser said.
For instance, the average yield on five-year US Treasury bills
increased from 2.75 percent last week to 2.83 percent last week on news that US consumer prices rose more than expected in January which would be adversely reflected on the value of fixed-income securities.
With the nation's deficit exploding, Swig said the government has sold on its debt and created, in his opinion, a major imbalance in the Chinese market which, he said, has become a depository for US Treasury Bills
Conversely, when a German investor buys US Treasury Bills
, that is portfolio investment.
For decades people believed that buying US treasury bills
or bonds meant money in the bag, so to speak.
Foreign investors have been pulling out money from India -- besides other emerging markets -- in June, to safer havens such as US Treasury bills
. The rupee has fallen 11.5 percent in 2013, making it the worst performing currency in major Asian economies.