Bonds News
- China sells U.S. T-bonds
Date: 20-Jun-2007 Sources: (Shenzhen Daily)
CHINA sold more U.S. treasury bonds in April than any time in at least seven years, a signal that the nation may be diversifying the world's largest foreign-exchange reserves, the Shanghai Securities News reported yesterday.
Statistics from the U.S. Treasury Department show that China sold a net US$5.8 billion of T-bonds, the first drop in holdings since October 2005. Japan remains the largest holder of U.S. T-bonds, with its holdings reaching US$614.8 billion in April, according to the statistics.
China remained the second-largest holder of U.S. T-bonds, as its stake fell to US$414 billion in April from US$419.8 billion in March this year. The United States had US$4.4 trillion of tradable bonds in April.
As an effort to diversify its forex investment channels, China also established a new specialized foreign exchange investment company named the State Investment Company to focus on investing in high-return bonds, stock markets, real estate and private equities. Analysts estimate the company may start with US$200 billion in capital.
'China's newly added forex reserves through trade surplus are enough to make high-yield investments, and China may not and need not to use the US$1.2 trillion forex reserves,'said Sun Mingchun, an economist with Lehman Brothers. 'China won't sell a large amount of U.S. T-bonds even if it wants to sell.'
Marc Chandler, chief currency strategist at Brown Brothers Harriman & Co., said that there's no clear sign Chinese investors are going to dump U.S. T-bonds, noting that Chinese officials have said they have no intention of doing anything that would devalue their holdings.
U. S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke have repeatedly played down concern of a sell-off in T-bond holdings by foreign investors. Paulson noted again this week that China's holdings amount to about one day's worth of trading in the T-bond market.
Greg Anderson, director of currency strategy at ABN Amro Bank NV, said he was unconcerned about the decline in China's holdings of U.S. T-bonds because the country is still buying U.S. assets, providing support for the dollar.
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