China, Japan trim US Treasuries holdings

China and Japan both trimmed their holdings of US Treasuries in July although foreign holdings of US Treasuries rose to a record high during the month, according to the data released by the US Treasury Department.

Japan, which remains the largest foreign holder, saw its US government bond assets fall to the lowest since October, decreasing to US$1.116 trillion (nearly HK$8.72 trillion) from US$1.118 trillion the previous month.

China, which is the number two, also cut its holdings to US$776.5 billion from US$780.2 billion in June.

The data shows that holdings of US Treasuries rose to US$8.339 trillion in July from US$8.211 trillion in June.

Market participants have been focused on Japan's Treasury holdings due to the country's recent interventions to boost the yen.

Japanese authorities appeared to intervene to sell dollars and buy yen in late April and May and again in July, which was likely financed in part by sales of Japan's US government debt portfolio.

The official data at the end of July showed that Japanese authorities spent 5.53 trillion yen (HK$300.15 million) intervening in the foreign exchange market that month to pull the yen off 38-year lows.

Treasury yields fell in July as traders adjusted to the likelihood that the Federal Reserve was getting closer to cutting interest rates.

The US central bank on Wednesday cut its rates by half a percentage point, the first cut since 2020, bringing its range to between 4.75 and 5 percent in light of the progress on inflation

Reuters