Easy monetary policy and inflation can cause currency depreciation. If yields continue to march higher, bonds may draw in alternative buyers. Why are the markets acting so assuredly when the incoming POTUS is "So Unpredictable"? US Treasury Securities Statistics - SIFMA NEW YORK, Nov 16 (Reuters) - Foreign holdings of Treasuries in September dropped to their lowest level since May 2021, data from the U.S. Treasury Department showed on Wednesday, led by Japan. Sassan Ghahramani of SGH Macro Advisors agreed with Turner that the the sell-off could continue as geopolitical friction between the US and China runs high. Well send you a myFT Daily Digest email rounding up the latest Investing under Trump news every morning. Is this happening to you frequently? Our Chart of the Week looks at the recent data release from a longer-term perspective. However, this leads to a huge pileup of USD as forex reserves for China. Who Wins if China Dumps US Treasuries? - MishTalk Thank you for your cooperation. This has driven the global share of USD reserves to its lowest since 2013. Since the U.S. dollar has a variable exchange rate, however, any sale by any nation holding huge U.S. debt or dollar reserves will trigger the adjustment of the trade balance at the international level. Stepping away from playing the blame game, perhaps the Fed has the perfect excuse now as long-term consumer inflation expectations has been softening,and there are no signs "inflation is overheating.". No, China is currently the second-largest holder of U.S. Treasuries, behind Japan (which holds around $1.1 trillion as of Q3 2022). We use China ranks second in total U.S. debt owned by foreign countries, with the U.K . These 30 Countries Hold 90% of U.S. Treasury Bills Russia's central bank has sold some $85 billion of its $150 billion holdings of U.S. assets from April through June, as the U.S. placed sanctions on its country and businesspeople. Optimists see it as a temporary fluctuation. Other major sellers - Saudi Arabia, Russia and Norway - are oil exporters, which have sold US treasuries to gain funds to offset the drop in dollar-denominated oil prices and to contain the deterioration of budget deficits. This has driven the global share of USD reserves to its lowest since 2013. Russias Treasury holdings fell to negligible levels in mid-2018, and are down from around $150 billion a decade ago, according to Treasury International Capital (TIC) data. Get a code sent to your email to sign in, or sign in using a password. U.S. Department of the Treasury. In other asset classes, U.S. corporate bonds posted inflows in September of $5.52 billion from $9.50 billion August. "Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States," Page 21. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Japan, which remains the largest non-U.S. holder of U.S. government debt, reduced its load of Treasuries for a third straight month. The same number of buyers must always exist to take the other side of the sale. The US has been increasingly imposing financial sanctions on other countries, such as Russia and Iran, to settle disputes and differences, making any country that has a dispute with US vulnerable. Selling or swappingsuch Treasurieswould reverse these advantages. Yarilet Perez China has steadily accumulated U.S. Treasury securities over the last few decades. The US has no monopoly in this regard. "This looks more likely a function of Chinese [foreign exchange] intervention to keep USD/CNY stable in a strong dollar environment," he said in a note to the Dutch bank's clients earlier this month. China has quietly unloaded 10 percent, or US$100 billion, of its US Treasury holdings in the first half of the year. The data does update after 90 days if no rating change occurs within that time period. At least four drugmakers are expected to launch new copycat versions of AbbVie's top-selling rheumatoid arthritis drug, Humira, over the next week, but experts expect little change in prices for the treatment even with the new competition. Analysts say using it as a financial weapon is likely to accelerate a move already under way by many countries to diversify investments into alternative currencies. As our Chart of the Week shows, any changes to the US dollars status are likely to emerge in the long run. Jul 30, 2018. necessarily represent those of the Strategic Culture Foundation. It is not even certain whether theEurozone (and Euro) will continue to exist in the mid-to-long term. The other countries which are sending goods to Australia are getting paid Australian dollars (AUD), so there is a huge supply of AUD in the international market, leading the AUD to depreciate in value against other currencies. Not to mention imposing sanctions on countries, limiting the free exchange of raw materials and goods, all of which is causing prices to spike -- leading to higher inflation, which in turn kills demand and growth. The most comprehensive solution to manage all your complex and ever-expanding tax and compliance needs. Saudi Arabia held $119 billion in Treasuries as of January 2022, down from $185 billion in February 2020. The other affected countries are the Philippines . Other countries have also been reducing their bond holdings. In the past 30 years, there were multiple reasons to add to your portfolio if U.S. Treasuries. The third reason is that as interest rates declined, the bonds you owned increased in value offsetting risks of currency fluctuations. Why These Countries Are Dumping U.S. Treasuries and What It - RealMoney A cheaper currency typically makes exports more competitive, but Beijing has appeared anxious not to let its currency slide too far. Build the strongest argument relying on authoritative content, attorney-editor expertise, and industry defining technology. FactSet calculates the Market Cap for the basic symbol to include common shares only. The industry leader for online information for tax, accounting and finance professionals. If Trump will trigger a US$1 trillion debt tornado at a moment, when Fed chief Janet Yellen and her board seek to accelerate tightening - in addition to recent 25 basis points hike, three comparable rate increases in 2017 - Trump can no longer rely on the Fed to ease and thus to monetize the debt issuance. The trend is expected to continue, exerting immense downward pressure on other currencies. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month. However, any sudden or relentless move higher on the back of inflation worries or aggressive tightening financial conditions, equities take as a headwind -- and investors get worried. Besides, Chinese government bonds and share stocks have been included in all major global benchmarks, including the Morgan Stanley Capital International equity indices and the Bloomberg Barclays bond index, and institutional investors who track those indices would automatically increase their holdings of yuan-denominated assets. A debtor nation has negative net investment after recording all of the financial transactions it has completed worldwide. Yuan vs. Renminbi: What's the Difference? China sold US government debt for a seventh straight month in June, in a potential sign that Beijing is trying to defend the yuan against the dollar. The appetite for US treasuries remains apparent in recent market movements. BelieveItorNot, great perspective, excellent comment. Yields of US Treasuries slid about 15 basis points during the month. Realists warn about structural change. read more. In today's installment of USMR Market Insights, Coy Wells discusses this economic impact and why you need to know about it. Since when do stock market gains imply a solid presidency? Recently, foreign holders of US treasuries have been dumping their holdings more and at a record pace. China needs to invest in such huge stockpiles to earn at least the risk-free rate. If China (or any other nation having atrade surplus with theU.S.) stops buying U.S. Treasuries or even starts dumping itsU.S. forex reserves, its trade surplus would become a trade deficitsomething which no export-oriented economy would want, as they would be worse off as a result. Treasuries are also attractive to investors as the market is larger and more liquid than others. The wheels are in motion. However, Turner said geopolitical considerations are at play too, given many governments are concerned by the move by the US and its allies to freeze Russia's foreign-currency reserves. And China has become an emerging destination for capital inflow, as overseas investors can more easily buy and sell stocks and bonds in the Chinese mainlands markets. Israel is one such example of a country reducing US Treasury bond holdings while increasing its assets in yuan, Canadian dollars, Australia dollars and yen. TheStreet Ratings updates stock ratings daily. In a sign that shift is already gaining pace, The Wall Street Journal said this month that Saudi Arabia was in talks to price some crude it sells to China in yuan. Geopoliticalrealities and economic dependencies often lead to interesting situationsin theglobal arena. Within the world economy, there are any number of countries doing well or just trying not to fall back. This article discusses the business behind the continuous Chinese buying of U.S. debt. Some analysts and investors fear China could dump these Treasuries in retaliation and that this weaponization of its holdings would send interest rates higher, potentially hurting economic growth. It's the largest selloff of U.S. debt since at least 1978, according to Treasury Department data. China's central bank, the Peoples Bank of China (PBOC), actively intervenes to prevent this imbalance between the U.S. dollar and yuan in local markets. Some sellers - Saudi Arabia, Russia and Turkey - also struggle with geopolitical challenges that are forcing them to reassess the weight of the US dollar and US ties in their foreign economic relations. As there is a pickup in yuan trading in gold, oil, and metals, it is no surprise that Trump is hell bent on trying to cripple China as he fears their growth and regional dominance following the One-Belt-One-Road initiative. Other asset classes like realestate, stocks, and other countries'treasuries are far riskier compared to U.S. debt. But, Chinese companies and their workers need to be paid in local currency, the yuan (or renminbi). If Trump takes that path, he may incentivize foreign holders of US treasuries and the international community to reassess the weight of US treasuries and US dollar in the world economy even faster than anticipated. China gets a huge market for its products, and the U.S. benefits from the economical prices of Chinese goods. ", U.S. Department of the Treasury, Fiscal Data. Assume Australia is running a current account deficit(i.e., Australia is importing more than it is exporting, as in scenario 1). ThoughtheEurozone has been in existence for about two decades now, it still remains unstable. America's top Asian bankers hold a combined $2.4 trillion in US Treasury debt and both have good cause to sell by William Pesek May 5, 2022 China and Japan hold trillions of dollars worth of US Treasury debt Image: Agencies NEW YORK, July 18 (Reuters) - Japan and China pared back holdings of U.S. Treasuries in May to multi-year lows, data from the U.S. Treasury department showed on Monday. Although I am not convinced that the bond bull is over, selling a few bonds and reducing exposure is prudent, especially if in fact we have seen the low in yields. It continues to raise concerns aboutthe U.S. becoming a net debtor nation, susceptible to the demands of a creditor nation. Though other labor-intensive, export-driven countries such as India carry out similar measures, they do so only to a limited extent. What if China and Japan dump their US Treasuries? - Asia Times With euro stockpiles, China canconsider investing in European debt. "The Historical Evolution of Central Banks: Narrative," Page 6. Markets China and Japan Slash Holdings of US Treasuries in May July 19, 2022 China's holdings of US government debt fell to $980.8 billion in May, the lowest since May 2010. If Treasuries are less appealing to some investors just as more supply hits the market, however, the result may be higher yields. Effectively, this intervention by thePBOC creates ascarcity of U.S. dollars, which keeps the USD rates higher. Foreign Countries Continue Dumping US Treasuries, Plus Asia And Foreigners were net buyers of U.S. corporate bonds for nine straight months. China has tight, state-dominated control over its economy and is able to manage inflation through other measures like subsidies and price controls. Nonetheless, the decline in many countries holdings of US government bonds suggests a shift in the mindset of many central banks. And at the fastest rate on record. See here for a complete list of exchanges and delays. China's holdings of U.S. Treasuries peaked between 2012-2013, with a value of over $1.3 trillion. The central bank then uses those dollars to purchase Treasuries, which earn a stable return. China, on the other hand, needs to be concerned about loaning money to a nation that also has the limitless authority to print it in any amount. Optimists see it as a temporary fluctuation. Because, their economies have declined and they need cash to pay their obligations! Japan's holdings fell. European Commission. Five large purchasers of US Treasuries - China, Russia, Norway, Brazil, and Taiwan - have changed their minds. In three months, Japanese institutional managers have dumped a cool $60 billion of US paper.
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