“SourceOneInternational†As China sells more US debt, could higher borrowing costs be around the corner?
“SourceOneInternational†strategists say that higher borrowing costs could be imminent for the United States as news emerged that China had trimmed its holdings of US treasury debt for the fourth consecutive month. http://www.ustreas.gov/
According to the US Treasury Department, China unloaded another $11.5bn in February and although this still leaves China as the largest foreign holder of US debt, “Source One International†ventures that this may be part of a move by China to further diversify its foreign currency reserves away from dollar-denominated holdings or, worse, another shot across the bows of an administration that continues to exert pressure on Beijing to allow its currency, the yuan, to appreciate against the dollar.
China still holds $877bn in US debt but, as “SourceOneInternational†analysts have suggested in the past, are keen to examine other assets like oil and gold as the dollar remains locked into its long-term downtrend despite the occasional rally.
Analysts at “SourceOneInternational†believe that America‘s massive debt issuance and that of numerous other countries including Britain and several EU states will eventually saturate the market place and force yields and by extension, interest rates higher as investors demand more in return for holding sovereign debt. http://www.investorwords.com/4630/sovereign_debt.html