Want to know one reason bonds are under pressure? Because the Chinese are dumping ’em en masse! Chinese holdings of U.S. government bonds plunged another $33.7 billion in August, the biggest monthly decline since 2013. The country now holds the fewest Treasuries in almost four years. Overall reserves have sunk to the lowest since 2011 amid ongoing investor outflows and the country’s effort to keep the currency from depreciating too quickly. Unfortunately, it hasn’t gotten much bang for its buck (or yuan). That’s because the currency just fell to a six-year low.
For U.S. investors, the bleeding of Chinese reserves puts downward pressure on asset prices – bonds in particular, but also stocks. So keep an eye on this trend.
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Surely having bonds in the economy is a good thing they help control the money supply? Help prevent another great depression aka the 1920s.