Trade War May Yet Spur China to Sell Treasuries as Yuan Tumbles

  • Beijing could tap reserves to buoy yuan, avert capital flight
  • Treasury yields remain low as investors seek haven from tumult
AllianceBernstein Sees Opportunities in Chinese Government Bonds
Lock
This article is for subscribers only.

The idea that China would dump its $1.1 trillion of Treasuries to retaliate against U.S. tariffs is often dismissed as improbableBloomberg Terminal. It’s seen as a nuclear option that would inflict more harm on China’s economy than America’s.

Yet the tensions rippling through global financial markets could still lead Beijing to reduce its stockpile in the $15.9 trillion Treasuries market -- not to retaliate, but to defend its currency if it goes into a free-fall. The offshore yuan has slumpedBloomberg Terminal 2.6% this month to about 6.92 per dollar as the trade standoff intensified, reaching the weakest since December.