It is again no coincidence that US administration officials are wooing the Chinese during a week when the Treasury needs to sell more than $200b of debt. Any sell side Wall Street firm would love to have these sales people. Making their thoughts heard, a Chinese official said “we are concerned about the security of our financial assets…We hope…the exchange rate of the US…remains stable.” Treasury Sec Geithner said they are committed to lowering the deficit “to a sustainable level by 2013.” An aside, while Bernanke expects inflation to be subdued for a few years because of the large output gap, the PBOChina said that commodity prices have bottomed, domestic demand is rebounding and liquidity is ample and thus “inflation expectations are emerging.” S&P/Case-Shiller HPI and Consumer Confidence are out today as is the 2 yr note auction. We’ll see if Fed President Plosser’s comments yesterday about raising rates in the not to distant future has any impact on the auction as the 2 yr is very sensitive to expectations of where the fed funds rate is going.
