The Sydney Morning Herald

China cuts US Treasury holdings by the most ever
The Sydney Morning Herald

China cut its holdings of US Treasury notes and bonds by the most ever, raising speculation a plunge in US yields has made government securities unattractive.

The nation’s holdings of long-term Treasuries fell in June for the first time in 15 months, dropping by $US21.2 billion to $US839.7 billion ($940 billion), a US government report showed yesterday. Two-year yields headed for a fifth monthly decline in August, falling today to a record 0.48 per cent.

« Buying now is a big risk, » said Hiroki Shimazu, an economist in Tokyo at Nikko Cordial Securities, a unit of Japan’s third-largest publicly traded bank. « I don’t recommend it. »

Investors who purchased two-year notes today would lose 0.4 per cent if the yield projection is correct, according to data compiled by Bloomberg.