According to a recent interview with Jay Jacobs, head of thematic and equity ETFs at BlackRock, China is planning to reduce its investments in US Treasury bonds in favor of Bitcoin and gold.
China's Plan for Asset Reduction
According to the US Treasury Department, as of the end of February, China held $784.3 billion in Treasury bonds. Over the past three to four years, Bitcoin and gold have emerged as new favorites among assets central banks are investing in.
Impact on Mortgage Bond Market
The mortgage-backed securities (MBS) market is heavily influenced by China's actions. If China begins to sell off its MBS, it would lead to a price crash and increased mortgage rates, particularly affecting homeowners with adjustable-rate mortgages.
New Market Reality and Assets
Jacobs emphasizes that cryptocurrencies like Bitcoin operate independently from traditional assets like stocks and bonds. Bitcoin thrives in uncertainty, unlike traditional investments that require stability to grow.
Thus, China's shift towards Bitcoin and gold could significantly impact US financial markets and mortgage rates, presenting new challenges for the global economy.
