- "On February 22 we published our first note on China’s investment strategy in US Treasuries, prompted by the US Treasury Department’s February 16 release of its Treasury International Capital (TIC) report for December 2009. This showed that China’s holdings of US government bonds had declined by a sharp $34.2 billion. Since the latter half of 2009, China’s holdings of US treasuries have remained on a downtrend."
• "As we analyzed from the February 16 report, the decline of China’s Treasury holdings from 2H 2009 was, we thought, a correction following the surge of its holdings from the latter half of 2008. Figure 2 plots the YoY change in China’s forex reserves and the YoY change of its US Treasury holdings. As markets fell into turmoil following the Lehman shock, China arguably increased its allocation to Treasuries, a relatively safe asset. Then, as the financial crisis abated and the real economy began to recover, China sought to return the level of its Treasury holdings to the original trend (Figure 1). We concluded, therefore, that there was probably “no reason to overreact to China’s current short-term moves”."
• "As we analyzed from the February 16 report, the decline of China’s Treasury holdings from 2H 2009 was, we thought, a correction following the surge of its holdings from the latter half of 2008. Figure 2 plots the YoY change in China’s forex reserves and the YoY change of its US Treasury holdings. As markets fell into turmoil following the Lehman shock, China arguably increased its allocation to Treasuries, a relatively safe asset. Then, as the financial crisis abated and the real economy began to recover, China sought to return the level of its Treasury holdings to the original trend (Figure 1). We concluded, therefore, that there was probably “no reason to overreact to China’s current short-term moves”."
JPMorgan Japan Equity Strategy 20100823
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