China: FX reserves being diversified, United States bond report may be fake

But others say China does not have too many options besides the U.S. government bonds into which it can invest its large forex reserves, making quick and dramatic moves unlikely.

The US 10-year Treasury yield edged down to 2.5366 percent from Wednesday’s close of 2.549 percent, while the dollar gained 0.3 percent to 111.72 yen after the regulator’s comment.

Energy stocks also added a few points to the index as oil prices stayed robust due to production cuts and a fall in US inventories.

It is not clear if the recommendations of the review have been adopted.

Even though central bank watchers said the BOJ’s actions aren’t interpreted as an imminent shift from ultra-accommodative policy by Japan’s monetary authority, it’s yet another sign of central banks stepping back from global bond markets – just as the U.S.is about to sell the most debt in eight years. China has the world’s largest foreign currency reserves, over $3 trillion, and is the biggest investor in United States government bonds, with $1.2 trillion in Treasuries as of October 2017, according to Treasury Department data. “But that correlation has broken apart fantastically over the last couple of days”, he said.

In other Forex news, the USD/CAD rose as worries of a U.S. NAFTA withdrawal tempered bets that the Bank of Canada will raise interest rates next week.

As the U.S. market retreated from its recent record-highs, Australian shares are headed for a weaker start today.

The recent moves higher in yields has shown that bond markets are at a turning point for technicals, according to strategists at Deutsche Bank AG, including the global head of credit strategy, Jim Reid.

The team at Capital Economics isn’t that anxious, however, noting that China’s holdings of Treasury bonds have remained more or less stable in recent years and that any shift away would risk lowering the value of their own holdings.

“With all that said, and similar to our views from a year or so ago, it remains premature to declare beginnings of bear markets”, he added.

ASIA’S DAY: Japan’s Nikkei 225 fell 0.3 percent to 23,710.43 and South Korea’s Kospi retreated 0.5 percent to 2,487.91.

The US government uses treasuries (or T-Bonds) to help finance itself.

The greenback extended losses after data showed USA producer prices fell for the first time in almost 1-1/2 years in December amid declining costs for services.

So, there you have it; at least one reason to panic about the bond market, and, in turn, the stock market, seems to have been laid to rest. This also pushed yields higher on government debt around the globe. The same concerns that lifted oil last week seem to remain in place, including less output from OPEC, falling USA supplies, unrest in Iran and Venezuela, and the recent spell of cold US weather that raised demand for heating oil.

The Dow Jones Industrial Average fell 52.2 points, or 0.21 percent, to 25,333.6, the S&P 500 lost 6.67 points, or 0.24 percent, to 2,744.62 and the Nasdaq Composite dropped 32.02 points, or 0.45 percent, to 7,131.56.

We know this because purchases of gold – the ultimate insurance against the dollar – have been declining for the past five years.

Investors monitor stock prices in a brokerage house in Beijing on January 2, 2018.