China, holding Treasuries, keeps “nuclear option” in U.S. trade war

(From Reuters)

China held around $1.17 trillion of Treasuries as of the end of January, making it the largest of America’s foreign creditors and the No. 2 overall owner of U.S. government bonds after the Federal Reserve. Any move by China to chop its Treasury portfolio could inflict significant harm on U.S. finances and global investors, driving bond yields higher and making it more costly to finance the federal government.

Jeffrey Gundlach, the chief executive of DoubleLine Capital LP, said China can use its Treasury holdings as leverage, but only if they keep holding them.

“It is more effective as a threat. If they sell, they have no threat,” said Gundlach…

Despite the current drama and the new tariffs China and the US remain in a mutually assured economic destruction regime.

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