The report notes that Beijing officials have advised financial institutions to pare down their holdings of US Treasuries, citing worries about “concentration risks” and “market volatility”. The Chinese regulators are said to urge banks to limit purchases of US government bonds while also commanding those with high exposure to cut down on their positions.
Naturally, this of course doesn’t involve China’s state holdings of US Treasuries. However, it is a directive that is said to be communicated to some of the nation’s biggest banks in recent weeks.
Beijing’s reasoning for the call is that they are sharing similar concerns to market players and other central banks/governments in that US assets have lost their appeal and status as a haven asset amid the recent market turbulence. That especially considering the Trump administration’s incoherent and erratic policy approach.
Of note though, the sources in the report mention that the directive came before last week’s call between Trump and Xi. As a reminder, the two leaders held talks in the past week with Trump laying out plans to visit China in April.
However, I’m guessing that regardless of the matter that the order above will hold. And that will be the new market convention that Chinese banks will have to follow, or should I say keep following.
As a reminder, China has continued to systematically withdraw their support for US Treasuries over the years. No, they’re not exactly dumping them per se but they are being more of a “stealth seller” so to speak.
The data speaks for itself with China’s direct holdings of US Treasuries falling to $682 billion as of January this year. That marks a 17-year low and well down from the peak of $1.3 trillion roughly a decade ago.
10-year Treasury yields have nudged up slightly on the report here, moving up to 4.24% on the day – up from around 4.22% earlier.
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