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Yuan Oil Contract, page-72

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timber1956

7,423 Posts.

152

10/04/18

21:58

Post #: 32360575
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Originally posted by timber1956 ↑

@aldo

"It is simply a matter of appointing agents and brokers out there to move them and the deal is done."

The Chinese cannot do a thing in the Treasury market without the US Treasury/US Fed knowing about it immediately.

When a US Treasury bond/note transaction is contracted, both parties have to notify the US Treasury (who maintains the registry of ownership). An agent may contract on behalf of the BoC, but the bonds have to leave the BoC holding in the US Treasury when they are sold, so the US Treasury know immediately. If they chose, they could refuse to process the transfer.

When the deal is settled T+2, the funds are credited by the buyer to the Bank of China account at the US Fed. The US Fed know - immediately. If the Fed chose, it could freeze payments from that account.

Through the Treasury and the Fed, the US government sees everything first. They can not be ambushed.

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I should point out that Bank of China has the same powers over Yuan denominated transaction. This is why so many entities doing business in China prefer to settle in US dollars, and why a Yuan denominated oil futures contract has limited appeal.

Last edited by timber1956: 10/04/18
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