(Bloomberg) — The world’s two largest foreign holders of U.S. Treasuries unloaded piles of Treasuries in the third quarter, rebounding ahead of the presidential election.
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Japanese investors sold a record $61.9 billion in securities in the three months ended Sept. 30, according to data released by the U.S. Treasury on Monday. During the same period, Chinese funds lost $51.3 billion, the second-largest total in history.
In mid-September, before Republicans took control of both chambers of Congress and the White House, the rate of return on U.S. Treasuries reached a 2-1/2-year high. The security has since fallen about 4% from that level on concerns that President-elect Donald Trump’s low-tax, high-tariff policies will accelerate inflation.
“This is a cocktail of banks and pension sellers ahead of the U.S. presidential election in Japan,” said Shoki Omori, chief Japan desk strategist at Mizuho Securities. “The risk of a Trump victory and expectations for a rise in U.S. bond yields are hurting bond sentiment. ” he said. Tokyo. “Geopolitical risks are a serious concern in China, which is also driving investors away from U.S. Treasuries.”
Japan’s selloff was partially amplified by its intervention in the foreign exchange market on July 11 and 12, when the Ministry of Finance sold dollars to buy yen totaling 5.53 trillion yen ($35.9 billion). There is a possibility.
Sales may also have been biased due to China’s use of custodial accounts. A Belgian fund believed to be home to such accounts for China bought a record $20.2 billion in U.S. Treasuries in September.
Uncertainty over Mr. Trump’s choice of Treasury secretary is also increasing upward pressure on U.S. yields, as the Federal Reserve’s bets on interest rate cuts fade in the face of economic resilience.
“It’s confirming everything we started pricing in,” said Nick Tweedale, principal analyst at AT Global. It will only lead to an increase in Sydney market. “These are good defenses by China and Japan, and they probably will continue to be that way.”
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