Dollar regains some poise after China dismisses USA bonds report

Gross calls bond bear market after Japan shock

Chinese officials responsible for reviewing the country's enormous foreign exchange reserves have recommended either slowing or stopping purchases of US Treasury bonds, Reuters reports via Bloomberg News.

Yields fall as prices rise. "25-year long-term trend lines broken in 5yr and 10yr maturity Treasuries".

The speculation that China may reduce its buying in USA bonds helped to underpin the euro, the most obvious alternative to the dollar for assets. "This positive relationship exists because many central banks intervene to slow the appreciation of their exchange rates when the Dollars depreciates", Commonwealth's strategists note.

Following the market's movement, bond veteran Gross, who is portfolio manager of the Janus Henderson Global Unconstrained Bond and Total Return strategies and a member of the global macro fixed income leadership team, took to Twitter on Tuesday to say "bond bear market confirmed".

BMO suggests buying 10-year Treasuries if yields climb to 2.6%. That prompted a sell-off of USA government debt in global markets.

All told, the three central banks are sitting on $14 trillion in securities they have bought since 2009: a $4.4 trillion mix of Treasuries and mortgage securities held by the Federal Reserve; the European Central Bank's $5 trillion in corporate and government bonds; and $4.5 trillion worth of bonds and exchange traded funds accumulated by the Bank of Japan.

But there is another interpretation that gets at the simmering tensions between the United States and China over North Korea and trade.

EPS Predictions Review: Tetra Tech, Inc. (TTEK)
The stock's 50-day average volume has been 1,228,184 shares, with an average of 25% of medium term indicators pointing toward Buy. A number of other hedge funds and other institutional investors have also added to or reduced their stakes in the business.

Like the initial report, financial markets have reacted hastily to the news, bidding up both the U.S. dollar and treasuries in response. The currency crash spread rapidly throughout South Asia and raised fears of a worldwide economic meltdown. "It's challenging to find any real substantial alternatives", with China earning dollars - the flip side of the USA current account deficit.

But any attempts to use that power could hurt the dollar, damaging China's own U.S. holdings. This brings stability and has been common practice for many countries ever since the Bretton Woods Conference in 1944 aimed at regulating worldwide monetary and financial order.

"Given our big Treasury holdings, sometimes we sell some and sometimes we buy some, changes will not be very big and there won't be big impact on markets", said Xu Hongcai, deputy chief economist at the China Centre for International Economic Exchanges, a Beijing think tank.

"A lot of the speculative accounts started to pile into the flattening trade; there was this bandwagon effect", Kohli said.

"Like other assets, China's investment in U.S. Treasurys is market-driven and is managed professionally based on investment demand and market conditions", the SAFE said.

An official at a foreign-exchange margin trading firm said charts signal that the dollar is heading lower.

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