China Weighs Slowing or Halting Purchases of U.S. Treasuries

by
January 10, 2018

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China added to bond investors’ jitters on Wednesday as traders braced for what they feared could be the end of a three-decade bull market.

Senior government officials in Beijing reviewing the nation’s foreign-exchange holdings have recommended slowing or halting purchases of U.S. Treasuries, according to people familiar with the matter. The news comes as global debt markets were already selling off amid signs that central banks are starting to step back after years of bond-buying stimulus. Yields on 10-year Treasuries rose for a fifth day, touching the highest since March.

China holds the world’s largest foreign-exchange reserves, at $3.1 trillion, and regularly assesses its strategy for investing them. It isn’t clear whether the officials’ recommendations have been adopted. The market for U.S. government bonds is becoming less attractive relative to other assets, and trade tensions with the U.S. may provide a reason to slow or stop buying American debt, the thinking of these officials goes, according to the people, who asked not to be named as they aren’t allowed to discuss the matter publicly. China’s State Administration of Foreign Exchange didn’t immediately reply to a fax seeking comment on the matter.

“With markets already dealing with supply indigestion, headlines regarding potentially lower Chinese demand for Treasuries are renewing bearish dynamics,” said Michael Leister, a strategist at Commerzbank AG. “Today’s headlines will underscore concerns that the fading global quantitative-easing bid will trigger lasting upside pressure on developed-market yields.”

The Chinese officials didn’t specify why trade tensions would spur a cutback in Treasuries purchases, though foreign holdings of U.S. securities have sometimes been a geopolitical football in the past. The strategies discussed in the review don’t concern daily purchases and sales, said the people. The officials recommended that the nation closely watch factors such as the outlook for supply of U.S. government debt, along with political developments including trade disputes between the world’s two biggest economies when deciding whether to cut some Treasury holdings, the people said.

2 Comments - what are your thoughts?

  • Barbara says:

    Find out how this came about that China owns California. Who sold out the state to China and how we can stop it. It was no–ones right to sell Calif state. This has to be corrected now. And make it a point that China doesn’t get another dime from us in any shape or form.!!!!!!

    1. Navy Bob says:

      If they want CA, let them have it. It’s not like anything really productive came out of there in the past 25 years. If they take the state, they take the debt and all of the nuts that live there. Can you imagine how Hollywierd would be under the rule of the Chincoms? Can you imagine that fat loser, Michael Moore-on, doing his “documentaries” about the Chicom government? I will tune into “News at 11” to see that sentence carried out.

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