China sold most US government bonds for almost 2-1 / 2 years in March due to uncertainty about a trade agreement between Beijing and Washington, US Treasury Department data released Wednesday.
Since last week after a gloomy ten-year treasury auction, there has been renewed speculation that China can sell its US debt in return for increased $ 200 billion of tariffs to its US exports.
The latest data on China's US bond portfolio was collected before a sudden breakdown in trade negotiations between the world's two largest economic forces 1
China sold $ 20.45 billion in treasures in March, most since October 2016, after $ 1.08 billion in purchases a month earlier.
China's share of government bonds fell for the first time in four months to $ 1,121 billion in March, the lowest since May 2017 when it was $ 1,102 trillion. It was $ 1,131 trillion in February, the data shows.
"The decline in this month brings China mainly flat to where they were in February, and deleted the increase from December to February," writes Jefferies LLC's senior money market economist Tom Simons in a
Despite the decline in Treasury's holdings, the world second largest economy the largest US creditor.
On the other hand, Japan increased its Treasuries holdings to $ 1,078 trillion, the highest since November 2017, from $ 1,072 trillion in February.
But another set of government bond data showed that Japan sold $ 11.07 billion in US government debt in March, mostly for US foreign creditor since February 2018.
Meanwhile, foreigners resumed sales of treasuries in March as US 10-year returns fell to 15 months decline after the Federal Reserve signaled it would not raise interest rates by 2019, according to the latest treasury data.
They sold $ 12.5 billion in US government debt in March following the purchase of $ 19.91 billion last month.
"Private investors have been major purchasers of treasury since the beginning of the second half of 2018, but foreign official institutions have been inconsistent," Simons said.
Official foreign sales of Treasuries coincided with a dollar rally in March, prompted by security beans for the dollar among worries about the world economy, trade tensions and uncertainty surrounding Brexit.
Central banks in export-oriented countries often sell their government bonds to defend their currencies from a strong understanding of the greenback.
Overseas accounts also sold stocks for 11 straight months, reducing their equity holdings by $ 23.64 billion in March.
On the other hand, they bought $ 4.74 billion in agency securities and $ 1.11 billion in corporate bonds.
The latest data showed a net US out total $ 8.1 billion in March, slower than the revised $ 21.5 billion in February.
Foreign central banks and other public entities accelerated their reduction of US assets and sold $ 21.7 billion in March against a revised $ 10.1 billion last month.
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The official foreign sales in March were offset by net purchases of private foreign investors who bought US $ 13.6 billion in US assets after a $ 11.4 billion turnover in sales in February.