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China sells most US Treasury securities in nearly two and a half years
By Richard Leong
(Reuters) – China sold the largest number of US Treasury securities in nearly two-and-a-half years in March amid uncertainty over a Beijing-Washington trade deal, data released Wednesday by the US Treasury Department said. US Treasury.
Since last week, after a dark auction of the US Treasury over 10 years, new speculation has been raised about the possibility for China to sell its US debt in retaliation for the increase in tariffs of $ 200 billion. its exports to the United States.
The latest data on US holdings in China were gathered before the sudden break in trade talks between the world's two largest economies a week and a half ago and before US tariffs on Chinese goods rose effective Friday.
China sold $ 20.45 billion worth of Treasury bills in March, the biggest volume since October 2016, after buying 1.08 billion the previous month.
China's share of treasury bills fell for the first time in four months and stood at $ 1,121 billion in March, the lowest level since May 2017, when it was the largest in the world. it was $ 1,102 billion. According to the data, the figure was $ 1.131 billion in February.
"The decline this month is essentially bringing China back to its current level of February, thus erasing the increases from December to February," said Jefferies LLC's money market economist Tom Simons in a research note. .
Despite falling Treasuries, the world's second-largest economy remained the largest US creditor.
Japan also increased its holdings of Treasuries to $ 1,078 billion, the highest level since November 2017, compared with $ 1,072 billion in February.
However, another series of Treasury data shows that Japan sold $ 11.07 billion of US public debt in March, the largest volume of the second largest US foreign creditor since February 2018.
(Chart: China, Japan sales of US Treasuries – https://tmsnrt.rs/2J43Ggv)
At the same time, foreigners resumed sales of Treasury securities in March, as US 10-year yields fell to their lowest level after 15 months, after the US Federal Reserve announced it would not raise its holdings. interest rate in 2019, according to the latest Treasury data.
They sold $ 12.53 billion of US public debt in March after buying $ 19.91 billion the previous month.
"Private investors have been major buyers of Treasury securities since the beginning of the second half of 2018, but official foreign institutions have been inconsistent," said Simons.
The official sale of Treasury securities abroad coincided with a rise in the dollar in March, boosted by safe haven offerings for the greenback amid worries about the global economy, the trade tensions and uncertainties around Brexit.
The central banks of the exporting countries often sell their Treasury holdings to defend their currencies from a strong appreciation of the greenback.
Accounts abroad also sold shares for 11 consecutive months, reducing their equity holdings by $ 23.64 billion in March.
In addition, they bought $ 4.74 billion in agency securities and $ 1.11 billion in corporate bonds.
(Graph: China, Japanese holdings of American treasures – http://tmsnrt.rs/2DJ1ckW)
PERSISTS OF EXIT
The latest data point to a net outflow of US $ 8.1 billion in March, down from the revised US $ 21.5 billion in February.
Foreign central banks and other government entities accelerated the reduction of their US assets, selling $ 21.7 billion in March, compared with $ 10.1 billion revised the previous month.
March's official foreign sales were offset by net purchases by foreign private investors who acquired $ 13.6 billion of US assets after revised sales of $ 11.4 billion in February.
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