To Sell or Not to Sell
The threat of China liquidating Treasuries as a bargaining chip in trade negotiations remains a possible scenario, but in our view a highly improbable one. As the saying goes, “If you owe a bank $100, you have a problem. But if you owe a bank $1,000,000,000, the bank has a problem.” China owns a large amount of U.S. Treasuries ($1.2 trillion, to be precise) [Figure 1]. The most recent data from the U.S. Treasury indicate that China actually increased its holdings during February. More updated data will be available next week, which could give investors more insight into China’s intentions.
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