China, Japan, and the UK collectively reduced their Treasury bond holdings, raising uncertainties regarding the U.S. fiscal deficit and 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. 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. The central bank acquired 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%. The Federal Reserve continues its quantitative tightening policy, selling $60 billion in bonds each month. These changes are seen as steps towards diversification and risk management in response to the U.S. fiscal deficit.
These developments indicate rising uncertainty in global financial markets and changes in asset management strategies. Portfolio restructuring among nations plays a vital role not just in diversification of investment strategies, but also in the quest for economic balance.
