The Blubber

China sells the most US assets in 4 years, dumping $21 billion of US stock and Treasury bonds, per BI.

In the month of August, Chinese investors divested $21.2 billion worth of US assets, marking the most significant outflow in four years, as reported by data from the US Department of the Treasury, as cited by Bloomberg.

This significant divestment of US securities coincided with the onshore yuan depreciating in August to its lowest level since November. This situation has led to speculation that Beijing might be seeking ways to support its currency.

The majority of the $21.2 billion in sales consisted of US Treasury bonds and stocks, with China-based funds also significantly reducing their holdings of agency debt, as outlined in the report. Chinese investors, in particular, offloaded approximately $5.1 billion worth of US stocks in August, marking the highest recorded amount.

According to Bloomberg, the pace at which Chinese investors are selling US assets prompted some observers on Wall Street to suggest that Beijing authorities may be exploring measures to bolster the weakening yuan. This includes selling US bonds to accumulate more dollars that could be used to intervene in the market and stabilize the currency.

China's economy has not rebounded as expected following the impact of the COVID-19 pandemic. Beijing is currently navigating challenges within an uncertain property market, a declining currency, diminishing trade, and weaker economic growth.

Concurrently, the US bond market has experienced substantial selling pressure in recent weeks from investors worldwide. The yield on the US 10-year Treasury is hovering around 5%, the highest level since 2007.

Strategists at Barclays noted this week that investors should not anticipate a significant decrease in yield in the near term, barring the occurrence of a financial shock or a recession.