According to U.S. Treasury data, China, Japan, and the United Kingdom collectively reduced their Treasury bond holdings by $81 billion in December, marking significant portfolio downsizing. Each country sold bonds at different rates, raising uncertainties regarding the U.S. fiscal deficit and rising borrowing costs.
Decline in U.S. Treasury Bonds
In December, China sold $9.6 billion in Treasury bonds, bringing its portfolio to a record low of $759 billion, the lowest level since 2009. Japan increased its Treasury holdings to $1.0598 trillion by selling $27.3 billion worth of bonds. The United Kingdom led in sales, reducing its portfolio by $44.1 billion to $722.7 billion.
China’s Gold Purchases
China resumed gold purchases in November, with the central bank acquiring about ten tons of gold in December, bringing its total to 2,280 tons by year-end. This move reflects the country’s tendency to diversify its strategic portfolio away from U.S. assets.
Market Conditions and Economic Outlook
The yield on 10-year U.S. Treasury bonds hovers around 4.5%, with market conditions applying pressure on demand. The Federal Reserve continues to adhere to its quantitative tightening policy, selling $60 billion in bonds each month to maintain control over liquidity.
