How China Might Weaponize Its Treasuries

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How China Might Weaponize Its Treasuries


One of the big downside risks for the US in its current trade war with China concerns the fact that Beijing owns $1.18 tn of US Treasuries. They also own billions of US mortgage bonds. The big question is whether they will decide to use such ownership as a weapon against the US. For instance, if they sold off large quantities of the bonds, it could send US yields spiking. However, it seems unlikely they would do say for a number of reasons. Firstly, it would hurt the value of their own holdings and all their other Dollar-denominated assets, and it would engender a lot more punitive action from the US. Some consider it the economic equivalent of "mutually assured destruction".

FINSUM : This is a grave risk for the US because of how it would push up rates all through the economy, but we do not think the trade war has gotten this serious yet.

  • China
  • trade war
  • Treasuries
  • mortgage bonds
  • US
  • yields

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Bonds

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