China’s holdings of U.S. Treasurys fall below $1 trillion, report shows

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

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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 US Treasury securities was below $1 trillion since 2010.

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

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

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As bond yields TMUBMUSD10Y,
2.989%
have spiked in response to surging inflation and the Federal Reserve’s rate-hike campaign, the S&P US government bond index has dropped 8%. Compounding the problem for prospective foreign owners, is that the value of the US dollar has soared, with the DXY index DXY,
-0.59%
up 11%.

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

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Credit: www.marketwatch.com /

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