While fear grows of a bear market in bonds, already helped by the Federal Reserve’s plans to unwind its massive balance sheet and raise rates as many as three times this year, there’s now another reason for markets to worry.
Senior government officials in Beijing have recommended halting or slowing purchases of US treasuries, according to a report from Bloomberg, which cited people familiar with the matter.
China, the world’s largest foreign holder of US debt, regularly assesses its strategy for investing its US$3.1 trillion of foreign-exchange reserves. It is not yet clear whether officials have made a decision on the recommendations.
“Today’s headlines will underscore concerns that the fading global quantitative-easing bid will trigger lasting upside pressure on developed-market yields,” Commerzbank strategist Michael Leister was quoted as saying.
The yield on the 10-year Treasury climbed 4 basis points on the news, hitting levels not seen since March of last year. The increase follows a rise on Tuesday driven by the Bank of Japan’s decision to trim its purchases of long-term bonds, as the Financial Times reported.