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


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.

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