China Might Stop Purchasing U.S. Debt

[Guest]

It’s not every day we write about the bond markets (youÂ’re welcome), but itÂ’s also not every day we hear reports that China is considering slowing, or even stopping altogether, purchasing U.S. Treasuries. The news sent yields higher as investors got the jitters and sold off bonds.

Here’s why this matters: Although it seems China and the U.S. are rivals, more accurately we’re “rivals with benefits.” China currently owns $1.2 trillion in U.S. debt, the largest foreign holder (Japan’s #2).

And it might be perfectly happy with that number. With inflation expected to grow alongside the global economy, hitching your wagon to fixed income (e.g. government bonds) might dampen your purchasing power down the road.

And we can’t forget about trade. President Trump railed against Chinese trade practices during the campaign, and we’re anticipating some actual policies (read: tariffs) to be rolled out soon. Attempting to throw the debt markets into disarray could be a preemptive strike from Beijing.

But at this point, since Xi Jinping wonÂ’t return our texts, itÂ’s mere speculation. WeÂ’ll keep our ears to the ground.

https://www.morningbrew.com/stories/china-might-stop-purchasing-u-s-debt/