China’s holdings of Treasury securities, which currently stand at almost $1.2trn equivalent to 8.2% of the total outstanding, offer it little leverage in the current trade spat with the US. Dumping those securities would, in theory, push up the Federal government’s borrowing costs, but we suspect that any increase would be limited since domestic demand for those securities remains strong and, if needed, the Fed could step in to resume its own purchases.
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