China sold most of the Treasuries in more than two years in March, raising concerns that the country could build its position as the largest foreign creditor of the US government. UU In the current trade dispute between the two countries.
China sold 20.5 billion dollars in US government bonds. UU Throughout the month, according to data published on Wednesday by the US Treasury. UU The data includes the negotiation of Treasury bonds maturing more than a year from official foreign institutions, such as central banks and private investors. Other major foreign holders, including Japan and the United Kingdom, were also net sellers.
Analysts pointed out that the period covered by the data predates the last collapse in trade talks between the US. UU And China and the subsequent increase in tariffs on Chinese imports by the Trump administration.
With the exception of a small net purchase last month, China has sold Treasuries every month since September. A fear in the USA UU It is that China could increase its sales of Treasury bonds in an attempt to disrupt the market and exert upward pressure on US interest rates. UU
"In almost all my meetings with clients, I wonder if this tool will be used," said Torsten Slok, chief international economist at Deutsche Bank. "The large size of [China’s] The reservations and that this is turning into a conversation means that the market should take it seriously. "
On Monday, Chinese officials said they would raise tariffs on an additional $ 60 billion of US products after a sharp escalation in President Donald Trump's trade war.
On Friday, last week, the Trump administration raised tariffs of $ 200 billion on Chinese imports to 25 percent after US and Chinese negotiators failed to reach an agreement on the future trade relationship between the two countries. Since then, the White House has moved to impose additional tariffs on another $ 300bn in Chinese imports in response to Beijing's latest retaliation.
But several investors and analysts have ruled out the threat that China will resort to such drastic measures to sell its holdings of the US Treasury.
China is the largest foreign holder of Treasury bonds, with a total of $ 1.12bn, which means that any increase in the yields it could generate would also mean losses in its own portfolio.
The size of China's Treasury holdings is a testament to the trade imbalance with the United States. One of the reasons why China buys Treasury bonds is because of the dollars it buys from exports to the United States. Analysts said China normally sells Treasuries when it needs to back its own currency, in effect selling dollars.
"This will be a long-term phenomenon in which they will have to back their currency and ease financial conditions," said Andrew Brenner, head of international fixed income at National Alliance Securities.
Sales in March were highlighted in part because the currency remained flat against the dollar throughout the month. In addition, sales had little effect on the direction of 10-year Treasury yields of interest rates in the United States fell 31 basis points to 2.41 percent.
"Normally, the answer to why this happened has been very similar: it has been the exchange rate," said Mr. Slok. "This time the number is more surprising. There are many open questions. "