The chart is from a recent Bank of Canada presentation. While the data seems slightly dated, its notable that U.S. prime mortgage arrears are over three times the rate of Canadian subprime arrears.
Are you guys ready for a second economic tsunami heading USA?
Next in line: China
When the US government borrows money, (May 2009, US owed China $772 billion) they do it in the form of selling US Treasury notes and bonds. They then pay interest on those notes and bonds for a set period of time. They have to mature a certain amount before they can be cashed in. If they are cashed in early there is a penalty and less interest is paid. Some notes are sold on the open market just like stocks. If they want to sell a large amount and flood the market with bonds. The prices would drop drastically and they would lose money.
Above story is good to a point in the last one year.. China kind of played with there US Treasury bonds. In exchange for Saudi Oil, they have dumped large portion of there Bonds in exchange for Black Gold. Ta Da !!!!
Arabs might be happy with all the paper in there hand, but it would be interesting to see.. In the coming months when US goes for there send Economic shock, how well will these bonds perform? Or are we looking at what would be one classic Junk Bond deal in the coming Economic history of our time.
