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- China orders banks to cut US Treasuries exposure as regulators warn of rising debt risks.
- Long-term decline leaves China’s US Treasury holdings at a 17-year low near $682.6B.
- Reduced foreign demand may lift Treasury volatility and push yields higher globally.
China has instructed major domestic banks to cut exposure to US Treasuries amid rising concerns over debt risk and price swings. The order signals a shift in reserve management and affects global bond markets. Regulators cited concentration risks and volatility.
Reports indicate that financial regulators warned banks about growing exposure to US Treasuries. They flagged price instability and balance sheet risk. Institutions were told to reduce oversized positions. Limits were also placed on fresh bond purchases.
China Cuts US Treasuries as Gold Accumulation Accelerates
China’s holdings of US Treasuries have declined for years. Official data shows current holdings near $682.6 billion. This is the lowest level in about 17 years. The figure is far below the peak of roughly $1.3 trillion reached a decade ago.
Over the past 14 years, China has reduced more than $500 billion in U.S. debt. The decline reflects a steady reallocation of reserves. During the same period, gold holdings increased. The shift points to diversification away from sovereign bonds.
Data shows China has purchased gold for 18 consecutive months. The buying streak highlights a preference for tangible reserves. Officials have not linked the policy to short-term market timing. The trend aligns with long-term reserve strategy changes.
The directive does not apply to central bank reserves. It targets commercial banks and their investment books. These banks had increased exposure to dollar assets. Regulators moved to curb that buildup.
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Market participants note the importance of China’s role in the bond market. China has been among the largest foreign holders of US Treasuries. Reduced participation may affect demand dynamics. Analysts watch yield movements closely.
Higher Treasury Yields Tighten Global Conditions
Lower foreign demand can raise volatility in US Treasuries. It can also place upward pressure on yields. Higher yields influence borrowing costs. Global financial conditions may tighten as a result.
The shift has attracted attention from asset allocators. In earlier phases, gold has benefited from bond market stress. The price had increased significantly before decreasing. The move has seen profit-taking after the rally.
There has been a sharp fall in Bitcoin prices from their earlier levels. The price is currently trading at $68,926. The data indicates that there has been a decline in various tokens. Major assets are significantly lower, 40% to 70%, than their earlier levels.
The crypto market has seen a pullback amid changes in global reserve flows. The link between bonds, gold, and digital assets has attracted attention from investors. The price movements are data-driven. The market is assessing the impact of China’s policy on US Treasuries.
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