THE US bond market has long had a dark cloud hanging over it: the threat that one of America’s biggest creditors, most likely China or Japan, might liquidate some of their enormous Treasuries holdings, driving up borrowing costs and triggering an economic and market crash.
Markets have largely shrugged off this doomsday scenario for decades – and for good reason – but the historic joint US-Japan currency intervention last week is a reminder that they shouldn’t get complacent.
For years, most experts believed that China, America’s main economic and geopolitical rival, would be the country likely to trigger such a crisis.
But Beijing’s stash of Treasuries has actually shrunk over the past decade.
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