Wainwright Marks Management - China Trims US Treasury Holdings

A year earlier, China's holding of US Treasury securities stood at $1.2 trillion and, in August this year, China's holdings reached their lowest point since June last year.

Wainwright Marks Management analysts reported that China's Treasury bill holdings dropped to $1.165 trillion in August after a third consecutive month of decline.

Bond traders have been observing closely to see if China is cutting its holdings of US Treasury Securities on purpose because of the ongoing trade dispute with the US but Wainwright Marks Management analysts say the reduction is probably not intentional.

The reduction in Treasury holdings has coincided with a period of increased currency volatility which may have had an impact.

Wainwright Marks Management analysts are of the opinion that the steady decline in China's US Treasury holdings is unsurprising.

China, followed by Japan, remains the largest holder of US Treasurys. In August, Japan's US Treasury holdings also declined slightly from $1.036 trillion in July to $1.030 trillion.

Although China's holdings of US Treasury notes, bills and bonds fell to a six month low of $1.171 trillion in July, Wainwright Marks Management analysts say they do not want to directly compare the situation to 2015 and 2016 because the fall has been fairly slow and moderate.

Wainwright Marks Management analysts say the Treasury market is expanding. The US government is issuing a greater number of Treasurys and foreign buyers are playing their part but on the whole, China's Treasury market has been shrinking for a number of years. The recent low level of holdings just emphasizes this fact.