China’s holdings of U.S. Treasuries declined for the third straight month, the longest stretch of reductions since 2011, a government report released today in Washington showed.
The country held $1.26 trillion in U.S. debt as of April, down $8.9 billion from the previous month, the Treasury Department said in a monthly report. China is the largest foreign holder of Treasuries, followed by Japan.
The decline may be related to China’s foreign-exchange reserve levels, said Aaron Kohli, an interest-rate strategist at BNP Paribas in New York. China’s accumulation of reserves will diminish after hitting a record in the first quarter, a Chinese government official said last week.
A slowdown “doesn’t give them much need to be buying Treasuries hand over fist,” Kohli said. “Treasuries don’t represent the kind of screaming value you would need to be buying them as an asset by itself.”
The last decline of China’s Treasury holdings extending more than three months was during the final five months of 2011, according to Treasury data compiled by Bloomberg.
Yuan forwards today dropped by the most in five weeks as China’s central bank reduced the reference rate after the U.S. dollar strengthened and after a report suggested capital inflows have slowed.
Source – Bloomberg