China unloads more US Treasury bills as odds of Fed rate cuts grow slim
- With the Federal Reserve suggesting interest rate cuts are unlikely in the immediate future, China has unloaded more of its US Treasury holdings
- Beijing’s foreign holdings have grown more diverse as country moves to reduce its stake in US debt and minimise the impact of geopolitics on its assets
Worries over security and a further delay to expected interest rate cuts by the Federal Reserve have depleted Beijing’s appetite for US Treasury bills, and its position as the second-largest foreign holder of the financial instruments could be taken by the UK in coming months, analysts warned.
The world’s second-largest economy offloaded US$22.7 billion of the bills in February, with its total holdings adding up to US$775 billion as of the end of that month, according to figures released by the US Treasury Department on Wednesday.
Japan consolidated its place as top buyer with an addition of US$16.4 billion in bills to its coffers in February for a total US$1.168 trillion of US debt, while the holdings of the United Kingdom rose to US$700.8 billion from US$691.2 billion during the same period.
“China’s overseas investment has been concentrated on US Treasuries in the past, [but] there is space for the Chinese government to further cut back its holdings in the future,” said Zhao Xijun, a finance professor at Renmin University in Beijing.
“Beijing is concerned about the impending rate reductions in the US, which will affect returns.”
The US dollar index reached a six-month high of 106 on Wednesday.
