Quick Take: Chinese Regulator Denies Curbing US Treasury Purchases

BOND REPORT: 10-year Treasury Yield Crosses 2.50% Mark, Highest Since March

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But as in a previous episode in 2009, such warnings may prove hollow.

In a statement posted on its website, SAFE said the report's sources might be wrong or that the story could be "fake news". It said investments in Treasuries are decided by market conditions.

Gold prices jumped to a four-month high as traders ramped up their purchases of the safe haven asset.

An official at a foreign-exchange margin trading firm said charts signal that the dollar is heading lower.

After all its not a zero sum game and China would harm itself as much as the USA if they went on a buyers strike, and overnight these reports were denied by government sources in Beijing, as SAFE, China's State Administration for Foreign Exchange saying, to coin a "Trumpism" that they were probably "fake news".

If markets are to crash, recent history suggests China's activity in USA bonds is unlikely to be the trigger.

The announcement has helped to lift the yen to six-week highs of 111.27 to the dollar on Wednesday from around 113.10 yen early on Tuesday. As in 2009, the latest news fanning concern about China's appetite for USA borrowings comes at an inopportune time, with the Treasury set to ramp up issuance as the Federal Reserve is shrinking its balance sheet.

"There is no evidence that China has been "slowing down or halting purchases of US treasuries".

But why does China hold so much United States debt? Measured by daily trading ranges, a year ago was the least volatile on record for the S&P 500 as USA and global stocks hit a series of record highs. "It's been this symbiotic relationship for the past 15 years or so".

"I don't think yesterday's operation is a hint of a policy change".

It added that "China's forex reserves management departments are responsible investors".

US Treasury undersecretary David Malpass dismissed concerns about China's bond-buying intentions.

That puts it neck-in-neck with Japan as America's largest creditor.

China's foreign reserves rose to their highest in more than a year in December, reaching $3.14 trillion, due to a stronger yuan and curbs on capital outflows. China has total reserves of just over $3 trillion. So too could a long-established trend that has seen the world's central banks seeking to diversify their foreign exchange reserves away from the US Dollar.

There are signs that the adjustment the Chinese officials recommended may already be happening.

The euro rallied against the greenback on Thursday after the European Central Bank said it could revisit its communication stance in early 2018, boosting expectations that policymakers are preparing to reduce their vast monetary stimulus program. The Federal Reserve and other central banks may be winding down their quantitative easing programmes but private sector buyers are ready to step in.

In the eyes of some, Chinese officials may be trying to send a message that they have leverage with President Trump talking tough on trade. "That helps explain the demand picture which has oil up at $70", said Scott Clemons, chief investment strategist at Brown Brothers Harriman, in NY. "But people are nervous about the Treasury market at the moment with a global pickup in growth".

"If that news is true, you'd expect a higher dollar price and a negative impact to earnings", said Mackay.

China Premier Li Keqiang said China's economy grew by about 6.9% past year, the official Xinhua News Agency reported Thursday.

That spooked investors anxious that sharp swings in China's massive holdings of US Treasuries would trigger a selloff in bond and equity markets globally.

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