China’s US Treasury debt holdings fall for sixth month in November
The world's second largest economy continues to dip into its reserves to prop up a weakening yuan and stem capital flows
China’s holdings of US Treasuries declined for a sixth straight month in November, as the world’s second largest economy continued to dip into its reserves to prop up a weakening yuan and stem capital flows.
China’s holdings declined to US$1.049 trillion, a drop of about US$66 billion, data from the US Treasury Department showed on Wednesday. November’s drop in China’s holdings was the largest since December 2011’s record fall of US$102.7 billion.
“This is in line, at the very least, with data showing that capital continued to flow out of China,” said Gennadiy Goldberg, interest rates strategist, at TD Securities in New York.
“Perhaps this does suggest that there is further pressure on the Chinese central bank to sell Treasuries to raise cash in order to meet those capital outflows,” he added.
China’s yuan currency had weakened around 4% against the dollar in October and November.
The pace of China’s selling of Treasuries is unprecedented. Over the six months through November, China had shed US$194.66 billion of Treasuries and over the previous 12 months, had sold US$215.11 billion. Both are records.
Japan remained the largest non-US holder of Treasuries for a second straight month in November, holding US$1.108 trillion in U.S. government bonds. But that was lower from Japan’s October holdings of US$1.131 trillion.
For an eighth consecutive month, foreigners unloaded Treasuries, selling US$205 million in November. That was, however, the fewest sold by foreigners since July 2014.
Tom Simons, money market strategist at Jefferies in New York said the holdings data are reported at the current market value “so the big drops in holdings in Japan and China are likely tied to the rapid rise in interest rates in November” following the US presidential election.
As a result of foreign selling of Treasuries, yields have risen. Yields on U.S. benchmark 10-year Treasury notes at the beginning of November were 1.82%, hitting a high of 2.4170 percent and ending the month at 2.3670%. Late on Wednesday, U.S. 10-year yields were at 2.427%.
Data also showed foreigners bought US$30.8 billion in long-term US assets in November after buying US$9.3 billion the previous month. Including shorter-dated securities, overseas investors purchased US$23.7 billion in November, after buying US$20.6 billion in October.
Foreigners also sold US$5.789 billion in US stocks in November, after buying US$20.535 billion the previous month.