China s investment in US government securities and other sovereign debt will continue to yield extremely low returns.

CDOs, collateralized debt obligations, are derived from mortgage backed securities.

The regulatory hybrid securities would have all the advantages of debt in normal times.

Of the roughly 200 trillion in global financial assets today, almost three quarters are in some kind of debt instrument, including bank loans, corporate bonds, and government securities.

Along with roughly 700 billion in Chinese holdings of US agency debt (Fannie Mae and Freddie Mac), China s total 2 trillion exposure to US government and quasi government securities is massive by any standard.

But the safe haven status of US government securities is an illusion.

But such interventions inevitably translate into more holdings of US government securities.

The Government Debt Bomb

And the market is prone to temporary fits of shared enthusiasm for emerging market debt, for Internet stocks, for residential mortgage backed securities, for Greek government debt. Traders need not wait to see when or whether the profits materialize.

But, according to US Treasury data, China s holdings of US government securities totaled 1.16 trillion at the end of 2010, accounting for roughly 60 of the overall increase in foreign official holdings of US government debt.

By buying government securities, the central bank injects cash into the banking system.

When Is Government Debt Risky?

For example, the US government should offer more financial instruments like Treasury Inflation Protected Securities (TIPS), thereby allowing China to convert some of its holdings of US government securities into similar but safer assets.

It winds up borrowing temporarily with short term debt then, as borrowing accumulates, it is refinanced with longer term securities.

But the ongoing depreciation of the US dollar which has fallen by almost half since the Bretton Woods system collapsed in 1971 together with the rising volume of US government debt, undermines the purchasing power of investors in US government securities.

BEIJING Despite shaky economic fundamentals, US government securities are usually regarded as a safe haven.

Insecure Securities

The U.S. Securities and Exchange Commission (SEC) is an agency of the United States federal government.

If interest rates on US Treasury securities were high and rising rapidly as the debt grew, I would agree with this argument.

You might just want to watch the video on mortgage backed securities and collateralized debt obligations if you need a refresher there.

Securing Synthetic Securities

(ii) Securities Act

(ii) Marketable securities.

Since then, emerging market currencies and fixed income securities (government and corporate bonds) have taken a hit.

Interest rates on government debt are still low.

Government debt The ratio of gross government debt to GDP must not exceed 60 at the end of the preceding fiscal year.

Indeed, the objects of such speculation astound the imagination tulip bulbs, gold and silver mines, real estate, the debt of new nations, corporate securities.

Investment banks then earn fees for re packaging these securities in tranches of collateralized debt obligations, or CDO s (and sometimes into CDO s of CDO s).

Even so, the explosion in the quantity of collateralized debt obligations and similar securities went far beyond what was needed to sustain mortgage lending.

A year ago, it vowed to stop accepting BBB rated government securities as collateral for its monetary operations.

What we do know is that China should have begun exiting gradually from US government securities long ago.

Through financial intermediation, these government securities helped finance the western consumption and speculative boom that collapsed in 2008.

128. Faced with the problem of the lack of public securities, the Government has begun adopting appropriate measures.

a transaction involving securities

Article 32. Tender securities

Article 32. Tender securities

Debt servicing represents a significant proportion of government expenditure.

Now, government bonds are by design instruments of debt.

Budget deficits automatically increase government debt, requiring higher future taxes to pay the interest on that debt.

Moreover, the US government provides a very good inflation hedge in the form of Treasury Inflation Protected Securities (TIPS).

At the end of 2011, China s central government debt amounted to 16.5 of GDP, and overall government debt totaled 18 trillion, or 38 of GDP.

The investment banks blended these securities into asset backed securities and collateralized debt obligations (CDOs) and sold them on to financial institutions throughout the world. These institutions, attracted by the high rates of return that were promised, invariably neglected the downside risks.

Weak Labor, Strong Securities Markets

My securities are over there.

My securities, are they safe?