The sovereign bonds market started the week on mixed footing, with Chinese holdings in the U.S. Treasuries plunging to their lowest level since the Global Financial Crisis of 2008.
Specifically, China’s Treasury holdings have fallen to $682.6 billion, down from a peak of $1.32 trillion in 2013, according to U.S. Treasury data.
However, some of that exposure may be reflected in Belgium’s holdings, often seen as a proxy for Chinese custodial accounts, which have quadrupled since 2017 to $481 billion, as reported by Bloomberg on February 9.
The same report also suggests that long-dated yields edged higher and the dollar weakened following news that Beijing urged domestic financial institutions to rein in Treasury holdings amid heightened market volatility.
Framed as a new way of mitigating risk, the plan follows in the steps already taken by India and Brazil, which have likewise reduced exposure to U.S. debt as confidence in American assets weakens.
Chinese holdings of Treasury securities. Source: BloombergGlobal economies lose confidence in U.S. Treasuries
Geopolitical tensions, such as President Donald Trump’s recent threats involving Greenland, have damaged foreign confidence in the U.S. economy, putting alternatives such as gold in the spotlight.
However, market pressure was also amplified by spillover from a politically driven selloff in U.K. government bonds and domestic issues, such as the recent dollar- and pound-denominated bond sale by Alphabet (NASDAQ: GOOGL).
Despite the seemingly alarming headlines, China remains the third-largest foreign holder of Treasuries after Japan and the U.K. At the same time, nations such as Canada, Norway, and Saudi Arabia, which were increasing their holdings last year, are helping offset China’s impact on the numbers.
What’s more, U.S. Treasuries have continued to outperform many peers, returning 5.3% over the past year, beaten only by Singapore and Israel.
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Source: https://finbold.com/chinese-holdings-in-the-u-s-treasuries-crash-to-lowest-level-since-the-global-financial-crisis/
