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Commercial paper has very short maturities, so unless there is a wave of bankruptcies it is hard to take losses. You don’t sell CP, you just stop rolling.
by jcampbell1 4y ago
Commercial paper has very short maturities, so unless there is a wave of bankruptcies it is hard to take losses. You don’t sell CP, you just stop rolling.
- ceejayoz 4y agoTether claims to have finished liquidating their commercial paper as of a couple days ago. https://twitter.com/Tether_to/status/1580601123026501642 https://twitter.com/Tether_to/status/1580601123026501642 Chinese commercial paper had a large wave of delinquencies earlier this year (https://www.reuters.com/markets/rates-bonds/china-commercial-paper-delinquencies-double-feb-amid-property-crisis-2022-03-04/ https://www.reuters.com/markets/rates-bonds/china-commercial...). The chances of Tether's holdings having zero defaults amongst all of that is... low. Tether has an easy fix here: release the "frequent professional audits" they claimed on their website as far back as 2015 (https://archive.ph/mVPmL https://archive.ph/mVPmL). They've provided various excuses and called attestations audits for nearly a decade now; their credibility is shot.
- jcampbell1 4y agoAfter doing some research I agree with you. It is known that tether was buying Chinese trash paper. Read the tweet again. What they wrote is perfectly true if they rolled off 30B and are sitting on 10B of trash that needs a huge loss provision. They never say they liquidated all their CP holdings. I suspect that tweet is truthful but completely misleading.
- ceejayoz 4y ago> They never say they liquidated all their CP holdings. They do separately say that; https://tether.to/en/tether-slashes-commercial-paper-to-zero/ https://tether.to/en/tether-slashes-commercial-paper-to-zero.... (They have, of course, repeatedly lied elsewhere on that website.)
- whimsicalism 4y agoNobody said zero defaults, just that they didn't take net losses on their paper and so can still liquidate and back with T-bills.
- bidirectional 4y agoBy definition they would never have assumed zero defaults when buying the paper, just few enough defaults for other gains to offset them.