Quick Bites | Is China Behind the Rapid Rise in U.S. Long Yields?

A continuation of strong and better-than-expected US economic data could explain the recent rapid rise in US long yields or perhaps is China to blame.

According to data released by the US Department of the Treasury, China has cut its holdings of US Treasuries for a fourth consecutive month, with its holdings reaching $822 billion. This represents the lowest level recorded since 2009.

Beijing has been selling $300 billion in Treasuries since 2021. The pace of Chinese selling has been accelerated in recent months amid persisting security concerns and geopolitical tensions.

Source: HolgerZ, Bloomberg

With US long yields near their GFC highs, the widening yield gap is pushing the yuan and yen to historically low levels against the US Dollar. This poses the risk that Beijing and/or Tokyo could soon start dipping further into their Treasury holdings to fund a dollar-selling intervention in the currency market.

The implications of this for markets? It supports the narrative of higher for longer yields and the process of market adjustment is ongoing.

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