China Sold More Treasurys, but Market Rallies On

China Sold More Treasurys, but Market Rallies On


Demand for U.S. government debt is so strong lately that not even an apparent slowdown in China’s appetite for it can stop the rally in bonds.


The price of the 10-year Treasury note leaped on Monday, pushing its yield, which moves in the opposite direction of price, to 2.579%, the lowest since March 2009. This came despite a Treasury Department report suggesting China was a net seller of U.S. debt in June for the second month in a row.


Not long ago, such a report might have caused a selloff in Treasury bonds. China has since 2008 been the world’s biggest foreign holder of Treasurys—and still is, holding $843.7 billion in U.S. government debt as of June, according to Treasury data.


But China’s holdings fell by $24 billion in June and $32.5 billion in May, according to the latest Treasury International Capital data. They are down $96.2 billion since peaking last July.


Short-term shifts in these monthly numbers are volatile and can be misleading. Analysts say China and other big foreign buyers are likely routing some Treasury purchases through the U.K. and Hong Kong, which would distort the TIC data. U.K. Treasury holdings have nearly quadrupled in the past year, perhaps partly for this reason.

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