China Calls Slowing Treasury Purchases Report "Fake News", Yields Slide

Less than 24 hours after Bloomberg headlines rang around the world proclaiming China would "slow purchases" of US Treasuries, China’s State Administration of Foreign Exchange, SAFE, pushes back on the report, saying it is "fake news."

As Blooomberg reports, SAFE says its investment in Treasuries is based on market conditions and its needs, and adds that it always diversifies investment of FX reverses.

Additionally, SAFE says the earlier report may have quoted a wrong source.

Reuters headlines provide a little more color:

  • CHINA'S FX RESERVES MANAGEMENT DEPARTMENTS ARE RESPONSIBLE INVESTORS -FX REGUATOR: RTRS
  • CHINA HAS BEEN DIVERSIFYING ITS FX RESERVES INVESTMENTS: RTRS
  • CHINA FX REGULATOR SAYS INVESTMENTS IN U.S. TREASURIES MARKET DRIVEN. CHINA HAS BEEN DIVERSIFYING ITS FX RESERVES INVESTMENTS: RTRS
  • REPORT ON CHINA CONSIDERING REDUCING OR STOPPING PURCHASES OF U.S. TREASURIES COULD BE BASED ON WRONG INFORMATION -CHINA GOVT SOURCE: RTRS

Following is a translation of a statement from China’s State Administration of Foreign Exchange in response to a report that said China may slow or halt purchases of U.S. treasuries.

"We are also aware of the news through some media reports. We think the report might have cited wrong sources or may be fake news.

"China has always managed its forex reserves investments in accordance with the principle of diversification, to ensure the overall safety of FX assets, to maintain and increase their value. Like other investments, FX reserves investments in U.S. treasuries is managed in a professional way according to market conditions and investment needs. China’s FX reserves management department is a responsible investor both for the FX reserves and for the market in which it participates. China’s investments have promoted the stability of international financial markets and the preservation and appreciation of China’s foreign exchange reserves."

US 10Y Yields immediately tumbled 2bps, well below the pre-China-headlines levels from this morning...

https://www.zerohedge.com/sites/default/files/inline-images/20180110_10Y_0.png

 

And Treasury futures volume surged...

 

https://www.zerohedge.com/sites/default/files/inline-images/20180110_10Y1.png

Presumably, Beijing's message was heard loud and clear (and acknowledged) in Washington.