It looks like you're using an Ad Blocker.
Please white-list or disable AboveTopSecret.com in your ad-blocking tool.
Some features of ATS will be disabled while you continue to use an ad-blocker.
Originally posted by nydsdan
Can I ask a really stupid question? Where does the IMF get this money from in order to issue bonds in such large denomination? Who controls IMF? Sure, member countries are supposedly working together - kinda like a financial UN or something, but who is at the head of the table, and who are they to create bonds?
With much of the world still mired in recession, the IMF took action to bolster its members’ reserves through an allocation of SDRs, or Special Drawing Rights.
The allocation, equivalent to $250 billion, was made on August 28 and will be followed by an additional, albeit much smaller, allocation of $33 billion on September 9. With the two allocations totaling roughly $283 billion, the outstanding stock of SDRs would increase nearly ten-fold to total about $316 billion.
Originally posted by stander
China has the right to purchase SDR like Mongolia, Iceland, or any other nation affected by the global economic downturn. The SDR has been around since 1969 and it wasn't invented to replace USD as the reserve currency -- IMF is like a world bank that can loan large sum of money to entire nations, coz there is no private bank rich enough to handle this type of loans.
The People's Bank of China didn't purchase any bonds for an investment, coz IMF is not in this kind of business. According to the agreement, the bank purchased regular SDR notes.
the PBC agrees to purchase from the Fund promissory notes
Series A and Series B Notes are identical, except that only Series A Notes are eligible for early payment on demand under certain circumstances, as specified in paragraph 7 of the General Terms and Conditions.
the Fund may issue and the PBC shall purchase Notes during an initial period of one year commencing on the date the first Note is issued or
September 30, 2009, whichever is earlier (the “Availability Period”). Unless otherwise agreed between the PBC and the Fund, the Fund shall give the PBC at least five business days’ (Beijing) notice of its intention to issue Notes for purchase under this Agreement, including the amount of the Notes to be purchased
Notes shall be denominated in the special drawing right (SDR). Notes shall be issued in multiples of SDR 10 million. The purchase price for each Note shall be 100 percent of the principal amount thereof.
Except as otherwise provided in this paragraph 4 and in subparagraph 7(b)(ii) below, each Note shall have a maturity date that is three months from its issue date. The Fund may in its sole discretion elect to extend the maturity date of any Note or of any portion thereof by additional periods of three months after the initial maturity date, which extension the Fund shall automatically be deemed to have elected with respect to the maturity dates
then in effect for all Notes unless, at least five business days (Washington) before a maturity date, the Fund notifies a Permitted Holder in writing that the Fund does not elect to extend the maturity date of the particular Note or portion thereof; provided however that, in no event, shall the maturity date of any Note be extended to a date that is later than the fifth anniversary of the issue date of such Note.
HONG KONG (MarketWatch) -- Hong Kong is pulling all its physical gold holdings from depositories in London, transferring them to a high-security depository newly built at the city's airport, in a move that won praise from local traders Thursday.
A report that Chinese state-owned companies will be allowed to walk away from loss-making commodity derivative trades provoked anger and dismay among investment bankers on Monday as they feared it may set a damaging precedent.
The State-owned Assets Supervision and Administration Commission, the regulator and nominal shareholder for state-owned enterprises (SOEs), told six foreign banks that SOEs reserved the right to default on contracts, Caijing magazine quoted an unnamed industry source as saying in an article published on Saturday.
While the details of the report could not be confirmed, it was Monday's hot topic in financial circles from Shanghai to Singapore as commodity marketers feared that companies holding underwater price hedges could simply renege on the deals, costing banks millions of dollars in profit.
The warning from SASAC follows a series of measures from Beijing this year to crack down on the sale of derivative products by foreign banks to Chinese enterprises, principally big consumers, who bought protection against higher prices last year only to watch the market collapse -- leaving them with losses.
While many companies including top airlines have come clean on the losses, some analysts fear another wave may follow.
China's state-owned enterprises may unilaterally terminate commodities contracts as they try to cut massive losses from financial derivatives, an industry source told Caijing on August 28.
According to the source, China's State-owned Assets Supervision and Administration Commission (SASAC) has sent notice to six foreign financial institutions informing them that several state-owned enterprise will reserve the right to default on commodities contracts signed with those institutions.
Keith Noyes, an official with the International Swaps and Derivatives Association, a trade organization, confirmed that he is aware of the matter, but provided no further comment.
Foreign brokerages usually work through their Hong Kong operations to sign over-the-counter derivative hedging contracts, according to an investment banker whose firm is involved in the business. Hong Kong and Singapore usually serve as venues for arbitration over such transactions.
Most investment banks may "just swallow" any losses arising from canceled contracts, the executive said, adding that any losses are usually made up for with compensating trades.
Investment banks "just earn less" from such transactions, he said.
But any such move would be a major blow to investment banks which service massive commodities hedging operations for Chinese SOEs on the international market, said the executive.
Chinese SOEs have suffered massive losses from hedging contracts since the onset of the global financial crisis. SASAC and the National Auditing Office has been investigating derivatives positions trading since the beginning of the year.
A source from a state-owned company told Caijing that most of Chinafs SOEs engaging in foreign exchange and international trade have participated in derivatives trading, involving capital topping 1 trillion yuan.
Originally posted by stander
reply to post by redhatty
I didn't read the whole agreement, but the "notes" are actually bonds. It looks like the IMF doesn't have enough funds to respond to many requests for an assistance. So they decided to borrow. I believe that the Chinese and IMF have come up with an instrument to create a special secondary market for the US Treasuries that China holds to liquidate them without undue losses. The biggest holders of US debt are likely to make this kind of purchase once again.
Originally posted by warrenb
reply to post by marg6043
To me it seems like the markets are doing exactly what they did this past January to March, before tumbling below 6800...
We could see the downward spiral very soon
[edit on 3-9-2009 by warrenb]