Market participants are also watching the Fed’s efforts to start shrinking its balance sheet, bloated through three rounds of emergency bond purchases, by slowly reducing the amount of money it reinvests in Treasuries and mortgage-backed securities. Officials expect the process to take several years and to run quietly in the background as the U.S. central bank continues to cautiously raise interest rates.
In that context, any comments from China on U.S. government debt will get attention -- and in this case, Chinese officials may be trying to send a message to Washington about Trump’s trade policies, experts said.
Brad W. Setser, an expert on international economic policy at the Council on Foreign Relations, said he wasn’t expecting China to make “big purchases this year even before the announcement.”
“Most plausible theory would be China wants to put the market on notice as Trump considers tougher trade action on China,” Setser said.
“The broader significance of this move is that it may reflect a shot across the bow from the Chinese government as it braces for trade hostilities emanating from Washington,” said Eswar Prasad, a China expert at Cornell University.
This article was provided by Bloomberg News.