🚨 Major Shift: China's US Treasury Strategy & Dollar Implications

This isn't just headline news; it's a foundational risk. 📉 China has reportedly instructed its banks to reduce exposure to U.S. Treasuries. This move has deeper implications than widely understood, as the U.S. Treasury market underpins global rates, liquidity, and risk assets.

China's U.S. Treasury holdings reveal a clear trend:
From a peak of $1.316 trillion in Nov 2013, holdings have steadily declined.
Japan surpassed China as the top foreign holder in Jun 2019.
Recent figures show a substantial reduction, signifying a deliberate strategy rather than market noise. 📊

This strategy aims to reduce dollar risk and strengthen domestic control. 🇨🇳 When a major buyer like China significantly steps back from U.S. debt, the market consequences are clear:
Yields rise
Liquidity tightens
Risk assets face pressure
This creates stress that often spreads quietly before becoming widely apparent. 📉

The U.S. Treasury market now requires a new marginal buyer. Historically, this transition typically occurs at higher yields. 📈
Higher yields lead to:
Increased cost of money
Drained liquidity
Broad pressure on risk assets
Markets often fail to price in this next step until it's already underway. Stay tuned for further insights. 💡