China dumps $3 billion of US treasury bonds

August 18, 2008 by · Leave a Comment
Filed under: Economic News 

Well there you go, the next leg of the dollar dropping is upon us.  We can not run a trade and account deficit of this proportion and bailout the commercial banks, homeowners, investment bank, GSEs and expect foreigners keep keep funding our debt and consumption.  All parties come to an end and I hope you have your chair reserved.


As of June, China held $503.8 billion worth of US treasury bonds, $3 billion less than in May, according to a report released by the US Department of the Treasury. This is the first time since February that China has cut its holding in the US government finance department.

In the latest Treasury International Capital (TIC) report, China remains the second largest holder of US treasuries by June after Japan, whose holding increased by $5.1 billion in June to $583.8 billion. The UK, the third largest holder, bought an additional $7.9 billion of bonds to reach $280.4 billion.

Although the TIC data showed China had cut US treasury holdings in June, there is a chance it may turn to other markets for the bonds such as Europe, said professor Ding Zhijie from the University of International Business and Economics.

Moreover, the large depreciation of the US dollar in June might dash investors’ confidence and lead to a slash of dollar-denominated assets in the foreign reserves of many countries, he said.

Given the expectation of the weakening dollar, measures should be taken to prevent further deduction of dollar assets, Ding suggested.

Net purchases of long-term US securities totaled $53.4 billion in June, far less than the revised value of $83.2 billion in the previous month, the US treasury department said.

Wall Street saw the largest monthly stock decline in more than five years in June due to investors’ concerns that the US housing market collapse and credit crunch would deepen. The plunge also makes US stocks and corporate bonds less attractive to foreign investors.

Statistics showed that in June, the net sale volume of US stocks from overseas investors reached $1.8 billion, compared with net purchases of $16 billion in May. Foreigners bought a net $4.7 billion of corporate bonds, compared with net purchase of $59.8 billion a month earlier.

Source: China Daily

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