China urges banks to limit US Treasury holdings
Treasuries extended losses following reports that Chinese regulators advised the nation’s financial institutions to reduce their holdings of US government bonds amid concerns regarding market volatility. Yields on benchmark Treasuries increased by as much as four basis points, reaching 4.25 percent. In London, the yield increased by 2 basis points to 4.22 percent, while the rate on the 30-year bond climbed three basis points to 4.88 percent. The Bloomberg Dollar Spot Index experienced a decline of 0.2 percent.
According to sources, Chinese officials had urged banks to limit their purchases of US government bonds and instructed those with significant exposure to reduce their positions. The officials refrained from providing any specific targets regarding size or timing, and the directive does not extend to China’s state holdings of Treasuries. The request may underscore a recent global trend, as countries such as India and Brazil reduce their exposure to the world’s largest bond market, fueled by increasing skepticism regarding the attractiveness of US assets.
According to official US data, China-based investors’ holdings of Treasuries have decreased significantly, halving to $682.6 billion, the lowest level since 2008, down from a peak of $1.32 trillion reached in late 2013. When considering Chinese holdings of US agency bonds and equities, it is evident that the Asian nation’s outstanding investment in American securities has remained relatively stable since late 2023. China ranks as the third-largest foreign holder of Treasuries, following Japan and the UK.
