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China increases its holdings of Treasurys for the initial eight months

China increases its holdings of Treasurys for the initial eight months

September 20, 2022: -On Friday, China increased its holdings of Treasurys in July for the first time in eight months, while Japan is decreasing its U.S. government debt load, data from the U.S. Treasury Department showed.

China’s stash of Treasurys increased to $970 billion in July, from $967.8 billion in June, which was the lesser since May 2010, when it had $843.7 billion.

On the other hand, Japan reduced its Treasury debt holdings to $1.234 trillion in July from $1.236 trillion the in the previous month. Japan remains the biggest non-U.S. holder of Treasurys.

The decrease in Japan’s holdings was more or less in line with moves in the currency market. The yen is firming in July against the greenback, ending the month at 131.6 yen per dollar, from 135.22 yen at the beginning.

This year, the yen’s steep fall against a resurgent dollar has raised the prospect of Japan intervening in the market to improve the Japanese currency. Since 2022, the yen has fallen 19.5% compared to the dollar.

Overall, foreign holdings of Treasurys increased to $7.501 trillion in July, from 7.430 trillion in June.

On a transaction basis, U.S. Treasurys is seeing net foreign inflows of $23.12 billion in July, down from $58.9 billion the last month. U.S. Treasurys is posting foreign inflows for a third straight month.

The inflows tracked price action in the Treasurys market. The benchmark 10-year Treasury yield began July at 2.904% and ended the month at 2.642%.

In different asset classes, foreigners sold U.S. equities in July for a seventh straight month, which amounts to $60.32 billion, from outflows of $25.36 billion in June. July’s flow was the largest since March.

U.S. corporate bonds posted inflows of $8.78 billion, coming down from $13.99 billion. Foreigners were net buyers of U.S. corporate bonds for seven months.

The Treasury data shows U.S. residents sold their holdings of long-term foreign securities, with net sales of $27.2 billion, which sales of $50.5 billion in June.

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China increases its holdings of Treasurys for the initial eight months