Treasury Secretary Scott Bessent has said that China couldn’t sell U.S. Treasuries to destabilize the financial markets, as it would affect their economy by weakening their currency.
What Happened: Bessent, while speaking to Yahoo Finance, reiterated that there was no purpose for China to “weaponize” the U.S. Treasuries, as such a move could affect China’s own economy.
“If they started selling Treasuries, they’d have an effect on the price. But more importantly, they accumulate dollars, and what are they gonna do with the dollars?” asked Bessent.
“So if they sell Treasuries, then they would have to sell RMB, and it would strengthen their currency, and they’ve been doing just the opposite. They’ve had a weak RMB or Yuan policy. So, it really serves no purpose for them to weaponize Treasuries.”
China is an export-oriented economy that manufactures many goods and services on its soil. The export-oriented economies generally benefit from a weaker currency. A weaker currency makes a country’s exports more competitive in the global market by making them cheaper for foreign buyers. This can lead to increased demand for exports, potentially boosting economic growth and creating jobs.
When asked if China still decides to sell U.S. Treasuries regardless of the effect on their currency, Bessent reiterated confidence in the government and the Federal Reserve’s ability to handle the situation.
“We have a big toolkit, we do buybacks, and the Federal Reserve has Treasuries at a certain level. If the Federal Reserve believed that a foreign rival were weaponizing the U.S. government bond market or attempting to destabilize it for political gains, I am sure that we would do something in conjunction with each other, but we just haven’t seen that,” he said.
See Also: Trump Administration Imposes Up To 245% Tariff On Chinese Imports Amid Intensifying Trade Battle
Why It Matters: Many analysts believed that a “Trump put,” from last week to pause the trade implementation for 90 days, was caused by the turbulence in the bond markets.
Schwab’s Chief Fixed Income Strategist, Kathy Jones, highlighted the divergence between the U.S. dollar and interest rates, confirming foreign selling of Treasuries.
