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Quick Take: Chinese Regulator Denies Curbing US Treasury Purchases

14 January 2018
Quick Take: Chinese Regulator Denies Curbing US Treasury Purchases

The end of a 35-year bond bull market may have been July 2016, when yields on 10-year Treasury bonds hit an all-time low in a "double-bottomed" pattern, although it wasn't apparent at the time, according to Gross.

The dollar recouped some of its recent losses on Thursday after China's regulator dismissed a report that the country could halt its buying of USA treasuries, boosting the greenback following its biggest one-day fall in a month.

Gold miners were boosted by a stronger price for the precious metal, with Newcrest Mining up 0.9 per cent at $22.86 and Evolution Mining up 2.8 per cent at $2.56.

China owned at least $1.2 trillion of Treasury debt as of October, according to USA government data.

The US administration is considering several new tariffs in the coming weeks, including broad restrictions on steel and aluminium imports and punitive actions against China arising from an investigation into Beijing's intellectual property practice.

Meanwhile, the NZX 50 index closed 1.37 percent lower at 8,250.44; FxWirePro launches Absolute Return Managed Program.

The Australian dollar rose to a two month high after the release of the sales numbers, hitting 78.82 USA cents, before falling back slightly by 1200 AEDT.

"It is very unlikely that China would slow its purchases of U.S. Treasuries to warn the Trump administration against aggressive trade measures", said Michael Hirson, a director at political risk consultant Eurasia Group.

To some experts, a move by China to pull back on its bond-buying could simply be seen as responsible-reserve management by one of the world's richest central banks. Earlier in the day, he told Bloomberg News that the unconstrained fund is short the bond market.

The news sent 10-year US Treasury bond yields to their highest levels since March last year, while the dollar fell against a number of major currencies.

"But China is the largest buyer [of US Treasuries], what it says will deeply influence investors' sentiments".

Not only would such a step hurt China by decreasing the value of its bond holdings, it would wreak havoc in a global economy that the country is now fully integrated into through deep trade and financial links.

China is the largest foreign holder of U.S. Treasuries.

The stakes may be higher now as tensions with the USA have been building since the election of President Donald Trump, who's been critical of the American trade deficit with China and other countries.

"To date, US inflation pressures have remain muted". The Fed is also expected to raise rates three times this year.

"The flush of money is being met by a flush of supply, and that produces higher rates", he said, noting that central banks have injected $14 trillion of liquidity into the market over the past five years.