Take five y ‘all… Smok ‘em if ya got ‘em while we decry the audacity of the vulgarian insurgency
China & Japan Dumping US Bonds – Prelude to War?
Beijing’s holdings of US securities have dropped by nearly $100 billion in six months
(Akash Maurya) China’s holdings of US treasury securities dropped below $1 trillion in May for the first time in more than a decade, information released by the US Department of the Treasury shows. Official data is regularly published with a two-month delay.
China, the second largest foreign holder of US government debt, has reduced its holdings for six consecutive months from $1.08 trillion last November to $980.8 billion in May. That’s a decline of nearly $100 billion, or 9%. The last time China held less than $1 trillion of US treasury securities was in May 2010 ($843.7 billion).
Japan, the largest foreign holder of US government debt, has also decreased its holdings recently. In the six months from November to May, it dropped by nearly $116 billion to $1.212 trillion.
The total US national debt was just above $30.4 trillion as of last month. Washington has been struggling to contain skyrocketing inflation that hit a 41-year high at 9.1% in June. The US Federal Reserve hiked its benchmark interest rate by 0.75 of a percentage point in June, triggering warnings of a possible recession. Another increase could be introduced in an upcoming meeting next week.
According to CNBC, rising interest rates have made US treasury securities potentially less attractive, but the decline in China’s share could also be attributed to Beijing working to diversify its foreign debt portfolio.
What does this mean? Did they SELL the BONDS back to US?
The US offsets their trade deficits with treasury bonds, with an expectation that they won’t be sold into the secondary market; leaving their trading partners to post them as collateral for loans, to do with the proceeds whatever they need.
Above average and sustained selling of US treasuries by one or more sovereign trading partners at the same time can easily tank global bond markets, forcing the US Fed to buy them with cash printed into existence from thin air.
War footing is one reason for events like this to take place.
Thank you for explaining !!
Is this why interest rates is going up?
Currency inflation is the text book answer for why yields have been rising. US Treasuries are considered cash equivalents that pay interest. The DXY (dollar index) has outperformed all major indices year to date, while losing purchasing power for goods and services at the highest published rate in modern times.