Before Trump won the election, the two major creditors of the United States sold U.S. debts!

In the third quarter of this year, as U.S. Treasury prices rebounded before the U.S. presidential election, the United States' two major overseas creditors sold a large amount of U.S. Treasury bonds.

Japanese investors sold a record $61.9 billion of U.S. Treasuries in the three months to Sept. 30, U.S. Treasury Department data showed on Monday. Chinese funds pulled out $51.3 billion during the same period, the second-largest amount on record.

Japan and China both sold off U.S. Treasuries in the third quarter

Treasury prices hit a 2-1/2-year high in mid-September, before Republicans took control of both houses of Congress and the White House. Since then, they have fallen nearly 4% from that high on concerns that President-elect Trump's low-tax, high-tariff policies will fuel inflation.

“It’s a combination of Japanese banks and pensions selling Treasuries ahead of the U.S. election, with the risk of a Trump win and expectations of higher Treasury yields dampening optimism about Treasuries,” said Shoki Omori, chief Japan strategist at Mizuho Securities in Tokyo. “This is even more true in China, where geopolitical risks are a real concern, which is also prompting investors to sell Treasuries.”

Japan’s selling of Treasuries may have been amplified in part by the country’s intervention in foreign exchange markets on July 11 and 12, when the Ministry of Finance sold dollars to buy yen, spending a total of 5.53 trillion yen ($35.9 billion).

Sales from China could also be skewed by its use of escrow accounts. Accounts in Belgium, which are often seen as coming from the Asian country, bought a record $20.2 billion in Treasuries in September.

Currently, Japan and China still hold U.S. Treasuries worth $1.02 trillion and $731 billion, respectively, highlighting their influence on the U.S. Treasury market.

U.S. Treasury holdings by country

Uncertainty over Trump's choice of U.S. Treasury secretary and investor concerns that the Federal Reserve may scale back rate cuts amid a strong economy also added to upward pressure on U.S. Treasury yields.

“We are confirming everything we had started to price in — that Trump is likely to adopt inflationary policies, impose tariffs, which will only lead to more Treasuries sales by China and Japan,” said Nick Twidale, chief analyst at AT Global Markets in Sydney. “This has been a good defensive move by China and Japan and they are likely to continue.”

Article forwarded from: Jinshi Data