China’s U.S. Treasurys holdings fall below $1 trillion for first time in 12 yrs

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The amount of U.S. Treasury securities held by China fell below $1 trillion, according to data released late on Monday.

The latest report from the Treasury Department showed that holdings of Treasury securities by China fell to $981 billion in May from $1 trillion in April. Compared to May 2021, China’s holdings fell by 9%. It’s the first time China’s reported holdings of U.S. Treasury securities was below $1 trillion since 2010.

In all likelihood, China holds more than $1 trillion of Treasury securities, through intermediaries. Belgium, for example, is the number-eight holder of U.S. debt at $268 billion, and analysts have said some portion of that figure comes from China. China also holds agency debt backed by the U.S. government.

The number-one foreign holder of U.S. debt, Japan, also has been reducing its holdings, with Japan’s U.S. Treasury ownership dropping 4% year-over-year to $1.21 trillion.

As bond yields TMUBMUSD10Y, 2.984% have spiked in response to surging inflation and the Federal Reserve’s rate-hike campaign, the S&P U.S. government bond index has dropped 8%. Compounding the problem for prospective foreign owners, is that the value of the U.S. dollar has soared, with the DXY index DXY, -0.83% up 11%.

There’s also the fierce geopolitical rivalry between the U.S. and China. Global Times commentator Hu Xijin tweeted that China was losing confidence in the U.S. economy and its credibility.

This article was originally published by Marketwatch.com. Read the original article here.

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