China Won't Use Treasuries to Warn Trump, Eurasia Group Says

China Won't Use Treasuries to Warn Trump, Eurasia Group Says

Global stocks stabilized Thursday after a tumble the day before that was triggered by reports, later rejected, that China may slow its massive purchases of US government bonds.

Investors worry that if China purchases fewer Treasuries, the US government will have to find alternative buyers. They also said that trade tensions with the United States were another reason to slow Treasury purchases, though they did not specify precisely why this was the case.

China's foreign exchange reserves - the world's largest - rose to US$3.14tn in December. "So it could be used as a "one stone killing two birds", which provides the Trump administration with pressure on both the markets and trade fronts", she said.

And while 2018 has brought some telegraphed risks into sharper focus, nothing has rocked the foundation of the $14.5 trillion Treasuries market, said Aaron Kohli, an interest-rate strategist at BMO Capital Markets in NY.

Against the yen, the dollar posted a even bigger fall of 1.1 per cent yesterday, its largest decline in nearly eight months. "I don't think that's worked out so poorly for the U.S".

Benchmark yields in the USA rose for the fifth day after officials in China reviewing the nation's foreign-exchange holdings were said to have recommended slowing or halting purchases of Treasuries.

"But China is the largest buyer [of US Treasuries], what it says will deeply influence investors' sentiments".

"The dollar was already notably weak ahead of today, despite the fact that USA data remained strong and yields continued to rise", said Boris Schlossberg, managing director of FX strategy at BK Asset Management in NY.

Siliguri Markets Deck Up For Makar Sankranti
Prime Minister Narendra Modi on Sunday wished the nation on the festivals of Makar Sakranti, Pongal, Magh Bihu and Uttarayan. Dedicated to the Sun God, Makar Sankranti symbolizes "Uttarayan" or the beginning of the northward journey of the Sun.

Later that month, Hu Xiaolian, director of China's SAFE, said Treasuries form "an important element of China's investment strategy for its foreign-currency reserves".

The Canadian dollar held steady at C$1.2553 per US dollar.

The stakes may be higher now as tensions with the USA have been building since the election of President Donald Trump, who's been critical of the American trade deficit with China and other countries.

A treasury bond is a marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years.

Some market experts speculate that China might want to send a message to President Trump over trade.

US Treasuries later pared some of their losses and the 10-year yield stood at 2.555 per cent in early Asian trade. On Wednesday, the yield was trading around the highest level since March past year.

In 2016, China's treasury holding tumbled US$187.7 billion when the country was briefly dethroned by Japan as the top holder of U.S. government debt, as China's central bank dipped into its reserve to defend the ailing yuan.

Analysts also said the rise in yields across the board is fuelling speculation as to whether this is the start of a sustained bear market for bonds.

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