- Regulators in China urged banks to reduce holdings of US debt, Bloomberg reported.
- Authorities cited concentration risk and volatility as reasons for scaling back Treasury investments.
- Bond yields edged higher and the dollar dropped almost 1% on Monday.
Regulators in China want banks to dial back their holdings of US Treasury bonds.
The move, reported by Bloomberg on Monday, is likely to fuel fresh talk about the "sell America" trade and the appeal of the dollar. Chinese authorities cited concentration risk and volatility in US debt markets as the reasons for scaling back.
According to Bloomberg, Chinese banks have been urged to limit new purchases, while those with high exposure have been told to dial back their investments.
Treasury yields, which move inversely to prices, were slightly higher on Monday morning. The dollar dropped more sharply, with the Dollar Index down almost 1% on the news. The fresh dip in the greenback follows its recent decline to four-year lows.
While the report notes that the regulators framed the directive around financial stability, rather than geopolitical maneuvering, it's likely to spur more debate in the market about countries' willingness to keep lending to the US.
The "sell America" trade, in which investors dump dollar-denominated assets from stocks to Treasurys, was a focal point of markets last year. It's been fueled by a combination of fiscal concerns amid record-high US debt and deficit spending, as well as weaker trust in US institutions amid threats to central bank independence and ongoing tariff threats. It's also been a force behind the debasement trade, which has boosted gold and other metals in the last year.
Bloomberg added that regulators did not specify how much exposure they believe Chinese banks should have to US debt at this time.
Data from the State Administration of Foreign Exchange shows that as of September 2025, Chinese banks collectively held $298 billion in US dollar-denominated bonds, but it's not clear how much of that is US Treasury debt.
Donald Trump and Chinese leader Xi Jinping spoke by phone last week, and could meet in Beijing in April.
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