China weighs slowing or halting purchases of United States treasuries

China weighs slowing or halting purchases of United States treasuries

China weighs slowing or halting purchases of United States treasuries

According to Reuters, which referenced a sourced report from Bloomberg News, Chinese officials charged with reviewing the country's foreign exchange holdings recommended slowing or halting those purchases.

Officials reviewing China's foreign-exchange holdings have recommended slowing or halting purchases of USA government bonds, Bloomberg News reported, citing people familiar with the matter. The report suggests that China feels US debt is becoming less attractive when compared to other types of investments.

The report also notes that Chinese officials think USA debt is becoming less attractive compared with other assets, adding that trade tensions between the two countries could provide a reason to slow down or halt the purchases.

Against a basket of currencies, the dollar was down 0.15 percent.

"If China stops buying Treasuries, the market could suffer", strategists at Jefferies said.

"You could be long dollar-yen and you could be long USA treasuries and you were getting yield on both sides of that". Such measures - already used by Beijing against countries like South Korea - could include informal regulatory actions that deny market access to US firms and goods, they said. The Fed is also expected to raise rates three times this year.

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"You already had this backdrop of rising rates and people are getting nervous", says Boris Rjavinski, senior interest rate strategist at Wells Fargo Securities in NY.

Rising Treasury yields can pressure prices for Gold, but USD's slide helped Gold shrug off any impact. "And when you get another story like China, a major holder of U.S. Treasuries possibly stepping back from the market, it adds to the overall bearish trend in the Treasury market".

Australian shares extended losses to a second session on Thursday, led by declines in financials, after a report that China may dial down purchases of U.S. government debt rattled Wall Street.

Still, Rjavinski stresses that it is "premature" to think that yields are on the verge of a sharp spike higher and that the multi-decade bull market in bonds is over and a bear market has begun.

"I think the Chinese will contribute to the removal of liquidity from the USA bond market", said Michael Shaoul, chairman and CEO of Marketfield Asset Management.

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