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Since the beginning of this year, global events have been going on, the new coronavirus has been mutating, the situation in Russia and Ukraine has continued to this day, OPEC Secretary-General passed away on the eve of his resignation, British Prime Minister Johnson resigned, former Japanese Prime Minister Shinzo Abe was shot...
The largest overseas "creditor" of the United States has largely reduced holdings US bonds
Under the influence of various events, the economic growth rate of many countries around the world has declined, the exchange rate fluctuates greatly, and the US dollar's global position has been shaken.
, the world's largest holdings of US Treasury bonds, sold nearly US$74 billion in March, setting a record for the huge sales of US Treasury bonds in a single month; it continued to sell US$13.87 billion in April, and Japan has reduced its holdings by a total of US$85.52 billion since the beginning of this year. As of the end of April, Japan held US$122 million in Treasury bonds, a new low since February 2020. It is still the largest overseas holder of US debt.
In addition, Japan's balance of payments data shows that Japanese investors sold US sovereign bonds for the seventh consecutive month in May, the longest reduction period since the data was available in 2005.
China, the United Kingdom, Brazil and other major countries have sold US bonds
Looking around the world, it is not just Japan, but also mainland China, India, the United Kingdom, Hong Kong, South Korea, the United Kingdom, Germany, Italy, Brazil, France, Switzerland and other major global economies all reduced their holdings of US bonds in April, and this collective reduction of holdings is very rare.
Specifically, mainland China reduced its holdings of US Treasury bonds by US$36.181 billion in April, the selling amount hitting the largest scale in the past 100 months (January 2014 to April 2022). Currently, China's holdings of US Treasury bonds are approaching US$1 trillion, the lowest level since June 2010.
The UK sold US$22.253 billion in April, and in January this year it sold US$38.64 billion; Brazil, France, Switzerland and other companies sold more than US$2.5 billion in April; at the end of April, China and Hong Kong held US bonds to the lowest since 2019, below US$200 billion, and the amount of U.S. bonds reduced in that month exceeded US$12 billion, and the total reduction of holdings from January to April was over US$30 billion.
The United States continuously reduced its holdings of Japanese long-term bonds from February to May
While Japan's large-scale reduction in holdings of US bonds, the United States is also shorting the Japanese bond market.
Data from the Bank of Japan shows that since February this year, as of May, the United States has netted holdings of Japanese long-term bonds for four consecutive months, totaling 8.36 trillion yen, of which the net reduction of 2.95 trillion yen in February, setting a record high since March 2018; the net reduction of short-term bonds from February to May totaled 134.315 billion yen.
Germany, Canada and other countries and regions have also reduced their holdings of Japanese long-term bonds to varying degrees. Canada has continuously reduced its holdings from February to May, totaling more than 600 billion yen; China's net holdings of Japanese long-term debt in May was 6.915 billion yen.
Why reduce holdings of US bonds: The yen depreciates seriously
There is no doubt that US bonds are "low-risk, high-credit" financial products and are very excellent safe-haven assets. The yields of US Treasury bonds have continued to rise recently. Since the COVID-19 epidemic and even 2018, US Treasury bonds have continued to be bearish, especially recently. Why is this?
Since the COVID-19 epidemic, the US economic growth rate has dropped sharply and employment pressure is severe. In order to alleviate these situations, the United States began to release money unprecedentedly, printing money and issuing additional U.S. Treasury bonds. A series of actions have led to depreciation of currencies in countries and regions outside the United States. The cost of large Japanese funds hedging with has increased significantly, which has led to the fact that these large Japanese funds have to sell US bonds and return to Japan, but the effect of the US dollar returning is not ideal.
According to Federal data, the exchange rate of the US dollar against the Japanese yen depreciated to 135.69 at the end of June, the lowest since 1999. The depreciation of the yen accelerated since 2021, especially since the Russian-Ukrainian conflict, the depreciation rate of the yen is comparable to the Asian financial crisis in 1998.
Chinese assets still retain their value
In contrast, Chinese assets still retain their value. After the outbreak of the new crown pneumonia epidemic, the exchange rate of the US dollar against RMB continued to decline. As of the end of June, the exchange rate of the US dollar against renminbi (middle price) rose to around 6.7. This is related to the stable growth of China's economy and the extremely attractiveness of China Securities assets.
From the A-share market , the Shanghai Composite Index and the Shenzhen Component Index both outperformed the important global stock indexes such as the United States, Germany, and France this year. Northbound funds netted in June, and net purchases of 3.56 billion yuan continued in July (as of July 8). Judging from the stocks , as of the latest closing, the price-to-earnings ratio was less than 30 times, and the Shanghai Composite Index was underperformed this year. There are only 10 stocks with an upper limit of more than 50% of the net profit growth in the interim report in 2022, including Sifang Technology, Jinhe Industrial, etc. Among them, Huagong Technology, Wanrun Shares and China COSCO Shipping ’s latest holdings increased compared with the end of June. Shengxing Co., Ltd. and Jingsong Intelligent fell by more than 25% this year.
Statement: All information content of Databao does not constitute investment advice. The stock market is risky, so be cautious when investing.
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