Founding BRICS members China and Brazil, along with newcomer Saudi Arabia, are quietly reducing their holdings of US Treasury securities.
New figures from the US Treasury show that China’s holdings of Treasury securities fell from $835.4 billion at the start of July to $821.8 billion at the end of the month – a drop of $13.6 billion.
Meanwhile, fellow BRICS member Brazil trimmed its Treasury holdings by $2.7 billion over the same period, from $227.4 billion to $224.7 billion.
And Saudi Arabia reduced its holdings by $1.1 billion, from $108.1 billion to $109.2 billion.
In addition, BRICS founding member India saw its official reserves shrink from $235.4 billion in June to $233.1 billion in July.
And the United Arab Emirates, another new BRICS member, reduced its cash holdings by $300 million, from $65.2 billion in June to $64.9 billion in July.
Adam Kobeissi, founder and editor-in-chief of The Kobeissi Letter, says the sell-off is now impossible to ignore.
“Since peaking about a decade ago, China has dumped nearly $500 billion of US Treasuries. Why is China selling US Treasuries so aggressively?
One answer is a possible slowdown in their economy. Another is that it could be part of a broader strategic shift. Either way, this is a trend that can’t be ignored.
A sell-off in bond markets and a rapid rise in Treasury yields has caused financial turmoil in recent days and weeks.
On Friday, a stronger-than-expected jobs report added fuel to the fire, with the 10-year yield hitting a high of 4.85% and the 30-year crossing 5%.
According to the CME’s FedWatch tracker, 72.9% of investors believe the Fed will leave rates unchanged next month, while 27.1% believe the Fed will raise rates by another 25 basis points.
