Here's Why China Buying Treasuries May Be a Bad Sign for Bonds
- Reserve managers tend to buy Treasuries during bearish cycle
- China bought $29 billion of debt in 2017, following 2016 sales
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Now that China is buying Treasuries again, maybe it’s time for everyone else to sell.
Having liquidated a record amount of U.S. government bonds in 2016 to stabilize the yuan and rein in capital flight, China’s central bank is buying again and seen willing to accumulate more. Riding the coattails of a $3 trillion giant may be a tempting strategy, but China, and reserve managers as a whole, have historically added Treasuries during periods of rising yields.