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Report Chinese could stop Treasury buying seen as political but hits raw nerve


Added 01-10-18 01:02:01pm EST - “A reported threat by China to stop or slow U.S. Treasury buying is being taken seriously and is seen as political by the bond market.” - Cnbc.com

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Posted By TheNewsCommenter: From Cnbc.com: “Report Chinese could stop Treasury buying seen as political but hits raw nerve”. Below is an excerpt from the article.

A threat by unnamed Chinese officials to stop or slow U.S. Treasury buying is being taken somewhat seriously by the bond market and is seen as a potential political message to Washington.

Bloomberg Wednesday reported that senior officials reviewing China's foreign currency holdings had recommended slowing or halting purchases of U.S. Treasurys because the debt is less attractive than other assets and, possibly, because of U.S. trade tensions.

The report comes as rates were already rising on concerns that the Fed and other central banks were tightening policy and governments, including the U.S., were issuing a pile of new debt.

Strategists say, however, they do not expect China to sell Treasurys or do much to damage the market where it is the biggest holder. If China does abstain from purchasing Treasurys this year, U.S. interest rates on the margin could rise more than expected. Currently, strategists mostly see the key yield on the benchmark 10-year Treasury topping out at about 3 percent.

The Trump administration is expected to issue two key trade decisions on steel and aluminum later this month, both of which could affect China. Worries about protectionist trade practices around NAFTA and China have been a major risk factor for financial markets.

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