tiptrot.com March 19, 2018

China Won't Use Treasuries to Warn Trump, Eurasia Group Says

13 January 2018, 12:58 | Nichole Osborne

Bill Gross declares bond bear market as 10-year Treasury yield tops 2.55%

The dollar sank against its peers following a report that Chinese officials had recommended slowing or halting purchases of US Treasuries

China is the largest foreign holder of USA government debt, with $1.19 trillion in Treasuries as of October 2017, according to the Treasury Department.

China disputes bond holding report * European Central Bank indicates may change policy message * Benchmark yields hover near 10-month highs By Kate Duguid NEW YORK, Jan 11 - Treasury yields fell early Thursday morning after China disputed a report that its government officials had recommended the country slow or halt its purchases of the USA bonds.

But the Eurasia Group analysts said that China had more targeted tools to pressure the USA and retaliate against trade measures.

"The US Treasury market is a deep, robust market within the world and so we are confident that our economy, with the economy strengthening, that it will remain a deep, robust market", Mr Malpass told reporters.

Calm was restored after China's state foreign exchange regulator said it could be "fake" news.

Benchmark 10-year note US10YT=RR yields were last down to 2.564 percent, after peaking at 2.597 percent, the highest since March 15.

China's foreign reserves rose to their highest in more than a year in December, reaching $3.14 trillion, due to a stronger yuan and curbs on capital outflows.

"It is China. It can not be said they will never sell U.S. Treasurys", said Keiko Onogi, a bond strategist at Daiwa Securities.

To some experts, a move by China to pull back on its bond-buying could simply be seen as responsible-reserve management by one of the world's richest central banks.

"China's rising foreign exchange reserves, and our view of Dollars depreciation, suggests China's purchases of US treasuries will either pick up, or more likely, remain stable", say Grace and Haddad.

On top of that, Wall Street also fell after Reuters reported that Canada is increasingly convinced Mr Trump will soon announce the United States intends to pull out of the North American Free Trade Agreement (NAFTA). "We are also skeptical of this hypothesis in the near term".

"We've noticed recently that protectionist voices have been rising in the US", China's Ministry of Commerce spokesman Gao Feng said at a regular news briefing. Beijing is believed to hold additional assets through intermediaries in Switzerland other financial centers.

"This change of dynamic suggests we may be in the midst of a regime change in the market where the dollar actually falls as USA yields rise on fears of deficit expansion and debasement of the currency", said.

"We should have full confidence in the US Treasury debt market, its depth and capacity are very big", he said.

In Shanghai, the CSI 300 shed 2.22 points, or 0.1%, to 4,205.59, with technology and financials among the top-performing sectors.

Brent has gained 5 percent since the beginning of the year, picking up from its late-year surge.

Conflicting media reports over the past 24 hours imply China may be considering buying fewer U.S. Treasurys.

Pimco, one of the world's biggest money managers, sees this week's US bond market selloff as a buying opportunity and is not ready to call the spike in 10-year Treasury yield to a nine-month high a bear market precursor.

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