China asks banks to curb US Treasury exposure as bond market jitters grow

Treasuries extended losses after Chinese regulators were said to have advised the nation’s financial institutions to rein in their holdings of US government bonds due to concerns over market volatility.

 

Yields on benchmark Treasuries climbed as much as four basis points to 4.25 per cent . In London, the yield was up 2 basis points at 4.22 per cent and the rate on the 30-year bond rose three basis points to 4.88 per cent . The Bloomberg Dollar Spot Index dropped 0.2 per cent .

 

Chinese officials had urged banks to limit purchases of US government bonds, and instructed those with high exposure to pare their positions, according to sources. The officials didn’t give any specific target on size or timing and the directive doesn’t apply to China’s state holdings of Treasuries. The request may reinforce a recent global trend that has seen the likes of India and Brazil lower their exposure to the world’s biggest bond market amid growing doubts about the appeal of US assets. 

 

China-based investors’ holdings of Treasuries have halved to $682.6 billion, the lowest level since 2008, from a peak of $1.32 trillion reached in late 2013, according to official US data. Taken together with Chinese holdings of US agency bonds and equities, the Asian nation’s outstanding investment in American securities has remained relatively stable since late 2023. China is the third-largest foreign holder of Treasuries, after Japan and the UK.