China joins global sell-off of US Treasuries in March as Iran war prompts panic

Mainland Chinese investors shed its holdings of US Treasury bills in March, echoing the move of many overseas institutions and central banks amid uncertainties over the US-Israel war on Iran.

Such reductions in Treasury holdings reflected mounting doubts in global markets, analysts said, as the escalating war in Iran fuelled concerns over inflation, energy prices and fiscal pressures, driving Treasury yields higher and overshadowing the likelihood of interest rate cuts from the US Federal Reserve.

Japan – the largest foreign holder – shaved down its stockpile by US$47.7 billion in March to US$1.192 trillion. Official data showed total foreign holdings of US Treasuries fell to US$9.35 trillion, down from US$9.49 trillion in February.

Robin Xing, chief China economist at Morgan Stanley, said the repricing of Fed cuts amid an oil-driven inflation has pushed yields higher, triggering a mark-to-market valuation loss while prompting global investors to turn more cautious on rates.

“We’re seeing global institutional investors currently favouring equities while staying broadly equal or underweight on government and credit bonds,” Xing said, before the data release.

He also noted that the Middle East conflict had disrupted shipping and temporarily reduced the oil surplus of exporting countries, weakening their capacity to buy US debt.