Is China halting US Treasury purchases?

Is China halting US Treasury purchases?

Is China halting US Treasury purchases?

The BoJ's actions are not seen as a sign of an impending shift from ultra-accommodative policy, but yet another sign of central banks stepping back from global bond markets, as the US Treasury is expected to sell the most debt in eight years in a bid to reduce its $4.4trn balance sheet. "It's challenging to find any real substantial alternatives", with China earning dollars - the flip side of the US current account deficit.

China holds the world's largest foreign-exchange reserves, at USD3.1 trillion, and regularly assesses its strategy for investing them.

"We think this story could be quoting a mistaken source or it could also be a piece of fake news", the State Administration of Foreign Exchange said in a statement on its website.

"We should have full confidence in the US Treasury debt market, its depth and capacity are very big", he said. The increase came as the size of the US debt market more than tripled to $14.5 trillion.

"The dollar may fall to around ¥110" in the days to come, the official said.

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China's foreign exchange watchdog has denied on Thursday that Beijing was considering suspending or slowing down its purchase of US Treasuries, refuting a news report the previous day which has weighed on US government bonds and the US dollar.

The strategists question the reliability of the report because, if China really were about to stop buying US Treasuries and made a decision to telegraph it beforehand, then it would hurt itself by driving down the value of the bonds already held on the PBOC's balance sheet.

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

China's holding of United States government debt - the world's largest, climbed US$131 billion in the first 10 months of 2017 to US$1.19 trillion, data from the Treasury Department showed.

BMO suggests buying 10-year Treasuries if yields climb to 2.6%.

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"You could be long dollar-yen and you could be long US treasuries and you were getting yield on both sides of that".

In the eyes of some, Chinese officials may be trying to send a message that they have leverage with President Trump talking tough on trade.

Coming into this year, strategists at Wells Fargo and some other banks were expecting China's Treasuries buying to ebb as they predicted stability in the yuan after a 2017 rally. The benchmark 10-year yield touched 2.597 percent, its loftiest level since March, according to Reuters data.

The US Dollar rose during early trading in London Thursday as traders shook off earlier concerns over a reported threat by Chinese officials to walk away from the US Treasury bond market.

"With markets already dealing with supply indigestion, headlines regarding potentially lower Chinese demand for Treasuries are renewing bearish dynamics", said Michael Leister, a strategist at Commerzbank AG.

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