India Sells Off Over 15 Bln in US Dollar Bonds, Following in China's Footsteps

CC0 / / US Dollar
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The developments came after China sold $3 billion in US Treasury bonds amid the ongoing trade row with the US, making it the third such sale in the last 14 years.

The Reserve Bank of India (RBI) has sold US treasury (USTs) bonds worth $16.3 billion since April, with the country's stock plummeting to $140 billion in late August, according to The Economic Times.

The newspaper reported that the sale came amid RBI's efforts to tackle the increasing slide of the rupee and "trim" its holding of US Treasuries as the RBI "joins many other emerging economies which have been selling off US bonds amid rising [interest] rates."

READ MORE: China's Sale of US Dollar Bonds Will Annoy American Manufacturers — Professor

The Indian rupee lost more than 10 percent of its value against the dollar after foreign portfolio investors (FPI) pulled out more than $10 billion in investments in the Indian markets since April. In this vein, a report by Bank of America Merrill Lynch predicted that "if FPI flows do not revive amid a US-China trade war, the RBI may need to sell another $10-15 billion by March."

In mid-October, Beijing sold $3 billion of sovereign dollar bonds in the face of the ongoing US-China trade spat, in a move that Bloomberg described as "an even bigger demonstration of China's pull in the international bond market."

READ MORE: Going Nuclear: Will China Dump US Bonds, Dollar to Stop Trump's Trade War?

Ziyun Wang, partner and senior portfolio manager at DeepBlue Global Investment Ltd, for his part, argued that "the bond issuance is more like a vote of confidence in China's creditworthiness."

US Treasury Secretary Steve Mnuchin, in turn, said that he is not "losing any sleep" over the prospect of China selling its stockpile of US government bonds.

READ MORE: Cashing Out: How New Sanctions Can Push Russia Into Dropping Its US Bonds

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Earlier, the US Treasury Department said in a report that in May, Russia sold $33.8 billion of its US Treasury bonds and is no longer among the 33 biggest holders of such securities. By contrast, in 2017 Russia increased its Treasury bond holdings from almost $70 billion in March to more than $92 billion in December.

China remains the main holder of US Treasury bonds, with its holdings amounting to more than $1.18 trillion. Japan is second, owning more than $1.04 trillion.

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