The idea that China could sell its vast horde of U.S. Treasuries in retaliation for the Trump administration’s tariffs has been called the ‘nuclear option’ in the trade war. But new data suggests it could be more of a bottle-rocket.An article that ran in Politico and the South China Morning Post last week explained the fear. “China could fire back by dumping its vast holdings of U.S. government debt. Flooding the market with treasuries would push down US bond prices and cause the yields to spike,” it claimed. Data released this week shows that China cut its Treasury holdings by nearly $20.5 billion in March, the fastest pace of selling in more than two years. China has reduced its holdings all but three months since last June–when President Donald Trump slapped a 25 percent tariff on $50 billion of Chinese imports. But far from hurting the ability of the U.S. government to issue debt or driving down the price of Treasuries, China’s selling has been accompanied by Treasury prices moving up and yields moving down. The yield on 10-year Treasuries was 3.09 on November first. On Wednesday it was 2.37. In March, the 10-year yield fell from 2.76 to 2.41. Yields move… Read full this story
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