Chinese Demand For Treasurys To Drop Further?

The rapid slide in the yuan, which has become increasingly correlated with other Asian currencies, could have wider implications on demand for U.S. Treasurys from the region, according to one market watcher.

“Aside from the Fed [Federal Reserve], the Chinese are the largest holders of Treasurys and whilst they have not been active buyers for some time, there is evidence that Asian currencies are increasingly correlated with the renminbi and less with the dollar,” David Keeble, global head of rates strategy at Credit Agricole wrote in a note on Wednesday.

“Thus, the depreciation of the CNY [traded onshore] and CNH [traded offshore] has wider implications for Treasury demand from the entire Asian central bank community,” he said, noting that in the recent years a significant portion of demand for Treasurys from Asian central banks have been in response to appreciation in their currencies against the dollar.

CNBC

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