Asian central banks unload U.S. bonds<\/p>\n
TOKYO (Reuter): Asian central banks were seen unloading some
\nof their U.S. Treasury bond holdings, with some reinvesting part
\nof the proceeds into shorter-term U.S. debt, traders and fund
\nmanagers said yesterday.<\/p>\n
"China was among the active U.S. bond sellers in the recent
\nweeks. They seem to be diversifying currencies in their portfolio
\nafter having bought U.S. Treasuries massively in the past year,"
\nsaid a chief fund manager at a Southeast Asian investment firm.<\/p>\n
China was the fifth largest holder of U.S. Treasury securities
\nat the end of 1996, with holdings of US$46.6 billion, according
\nto Securities Industry Association data.<\/p>\n
Last week, the Chinese central bank was said to have sold $1
\nbillion worth of U.S. 10-year Treasury notes, traders said.<\/p>\n
Coincidentally, China's T-note sales came after Prime Minister
\nRyutaro Hashimoto's remark that Japan might be tempted to sell
\nsome of its U.S. Treasuries for gold, which sent U.S. financial
\nmarkets into a turmoil.<\/p>\n
But bond traders said China's sales were not directly
\nconnected to Hashimoto's remarks, but might have reflected their
\nspeculative or portfolio interest.<\/p>\n
One bond trader said the bank apparently bought two- and
\nthree-year U.S. Treasury notes on Friday, a move that might be
\naimed at shortening the portfolio maturity.<\/p>\n
"The pace of purchases by Asian central banks has recently
\nbeen decelerating, compared with their aggressive buying stance
\nseen in the last year," said a U.S. brokerage trader.<\/p>\n
But this does not mean that they have lost interest in U.S.
\ndebts, he said adding that some of the banks bought five-year
\nTreasuries last year.<\/p>\n
In foreign exchange markets, Southeast Asian central banks
\nseem keen to unload the long positions in the dollar built above
\n115 yen, currency dealers said.<\/p>\n
"Our feeling is that Asian central banks, including China,
\nwere stuck with their long dollar positions which had been built
\nabove 115 yen," a Japanese bank trader.<\/p>\n
The dollar has been so far prevented from rising above that
\npoint due to selling by Japanese exporters and Asian central
\nbanks, traders said.<\/p>\n
Some traders had speculated that the Chinese central bank
\nmight be trying to increase its cash positions by liquidating
\nU.S. Treasuries in preparation for possible speculative attacks
\non the Hong Kong dollar in the post-handover market.<\/p>\n
But a senior Asian currency trader at a major Japanese bank
\ndismissed such a possibility, saying that both Hong Kong and
\nChina hold a hefty amount of external reserves.<\/p>\n
Furthermore, the bullish Hong Kong stock market and the
\nChinese government's determination to protect the HK dollar's peg
\nto the U.S. dollar have so far made it difficult for speculators
\nto attack the Hong Kong dollar, he added.<\/p>\n
China and Hong Kong signed a bilateral repurchase agreement
\npact in 1996 to provide liquidity to each other in times of
\ncurrency crisis.<\/p>",
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