Three major world powers – China, Japan, and the UK – significantly reduced their holdings of US Treasury bonds in December. The combined decrease totaled a whopping $81 billion.
A Trillion-Dollar Sell-Off
- China: Shed $9.6 billion, leaving them with $759 billion – their lowest level since 2009.
- Japan: Sold off a massive $27.3 billion, still holding the largest share at $1.0598 trillion.
- UK: Made the biggest move, unloading $44.1 billion, resulting in holdings of $722.7 billion.
This significant decrease in US Treasury holdings raises questions about global confidence in the US dollar.
China’s Gold Rush
Adding to the intrigue, China’s central bank continued its gold buying spree in December, adding approximately ten tons to its reserves. This brings their total gold reserves to 2,280 tons by the end of the year. This move, alongside the Treasury sales, suggests a potential shift away from the US dollar.
The Bigger Picture
These actions occur against a backdrop of rising US borrowing costs and a growing national deficit (around $2 trillion). Ten-year Treasury yields are hovering near 4.5%, putting pressure on demand. The Federal Reserve’s ongoing quantitative tightening, involving the sale of $60 billion in Treasuries monthly, also contributes to the market dynamics. The combined effect of these factors creates uncertainty in the global financial landscape.
