Source T-ETCs are secured by US Treasury Bills
and cash and are designed to track the S&P GSCI family of commodity indices which include broad, sector and individual commodity indices such as cotton, crude oil or sugar.
When Lehman Brothers collapsed every asset except US Treasury bills
and gold appeared to carry too much risk
Chinese investments increasingly took the form of official purchases of US Treasury bills
. These investments did not create new resources to provide the means of repayment.
the 2.5%-5.3% rate on US Treasury Bills
and the lacklustre performance of US, European and Japanese equity markets.
China, however, welcomed the US fiscal deal as it will help boost its exports and help it reduce inflationary pressures on Beijing given the Chinese holding in US treasury bills
and other investments that will be relatively secure now.
The result is that China and other East Asian countries own a large and growing stock of US Treasury bills
. Through financial intermediation, these government securities helped finance the western consumption and speculative boom that collapsed in 2008.
And it was the Chinese who were there to buy up all the US Treasury bills
that country needed to fund its extravagant lifestyle.
The issue, which will mature on June 26, 2013, has a coupon of 1.500 percent and spread of 27 basis points or 1.375 percent over the comparable US Treasury Bills
, which will mature on May 15, 2013.
The unbalanced relationship between the two trading nations with Chinese funding the acquisition of its goods by the US public through lending of money via purchase of US Treasury Bills
is an unsustainable business model.
Holding dollars today represents risk without reward: The returns to US Treasury bills
are near zero, and even those most confident in the Federal Reserve must acknowledge the chance that things will not go smoothly.
Having pegged these bonds to US Treasury bills
, purchasers receive a US Treasury zero-coupon bond which matures in the year 2020.