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China : Country denies report it could halt USA bond purchases

China : Country denies report it could halt USA bond purchases

The Dow Jones Industrial Average .DJI rose 205.6 points, or 0.81 percent, to 25,574.73, the S&P 500 .SPX gained 19.33 points, or 0.70 percent, to 2,767.56 and the Nasdaq Composite .IXIC added 58.21 points, or 0.81 percent, to 7,211.78.

Bitcoin dropped 9.2 percent to $13,517.83 on the Bitstamp exchange, after South Korea's justice minister said a bill was being prepared to ban cryptocurrency trading.

Senior Chinese government officials have recommended slowing or halting purchases of Treasuries, in part given trade tensions with the US, according to people familiar with the matter cited by Bloomberg News Wednesday - news that wound up having little lasting impact on trading as yields ended little changed after spiking to the highest since March.

China has been diversifying its forex reserves investments and its investments in US Treasurys is market-driven, the State Administration of Foreign Exchange (SAFE) said on its website.

National Australia Bank strategist Alex Stanley said global demand for US Treasuries was a major risk to watch, "but one should be wary of extrapolating reports on China demand into views that yields are poised for an imminent surge higher".

The dollar then rallied and was up 0.4 percent against the yen, although the US currency is still down more than 1 percent against the yen this week after markets bet the Bank of Japan (BoJ) could start to tighten monetary policy faster than expected.

This could result in very bad things for the bond market for a few reasons.

Like the initial report, financial markets have reacted hastily to the news, bidding up both the U.S. dollar and treasuries in response.

The analysts said in the note a global recovery and potential central bank action are possible drivers of a sustained sell off in bonds, though they stopped short of saying that this trend has begun.

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"I have been expecting rising trade frictions between the United States and China this year". Later the same month, however, the USA launched an investigation into aluminum and steel imports to protect US national security interests.

Not only would such a step hurt China by decreasing the value of its bond holdings, it would wreak havoc in a global economy that the country is now fully integrated into through deep trade and financial links.

The dollar was down 1.13 percent at 111.37 yen, after touching 111.29 yen, its weakest since late November.

The dollar had slumped as the Bank of Japan's move to trim its purchases of long-dated government bonds (JGB) this week reverberated across currency markets.

In the past two weeks, two of China's star companies, Ant Financial and Huawei, have met setbacks in the U.S. market where their investments were being obstructed, triggering a wave of mainland Chinese state media criticisms against the USA government for its "protectionism".

The Canadian dollar traded at C$1.2554 per US dollar after having lost 0.7 percent on Wednesday. That involved active selling of USA bonds - at the start of 2014 China's US bond holdings stood at $1.3 trillion and by January past year were barely $1.0 trillion.

Platinum was up 0.9 per cent at $US973.60 an ounce, after hitting a almost four-month high of $US973.90.

Brent crude futures traded at $69.03 a barrel, down 17 cents, after rising as high as $69.37 on Wednesday, highest since May 2015.

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