USA 10-year yields highest since March on China bond holdings fears

"Consequently, some future selling of US treasuries may be forthcoming by market participants, including from China, as well as elsewhere, because of inflation pressures", say Grace and Haddad.

A possible slow-down or halt to China purchasing US Treasury yields could have significant repercussions, Onada said in a note.

KEEPING SCORE: Britain's FTSE 100 rose 0.2 percent to 7,761 and France's CAC 40 was up 0.1 percent at 5,507.

The pan-European FTSEurofirst 300 index lost 0.46 percent and MSCI's gauge of stocks across the globe shed 0.11 percent. Futures augured small gains on Wall Street, with S&P and Dow futures both up 0.2 percent.

China wouldn't let geopolitical issues drive decisions on foreign exchange holdings, the Eurasia Group said, after Bloomberg News reported officials had recommended scaling back USA government debt purchases.

The move higher-to 2.59% for the 10-year Treasury yield, from 2.43% at the end of 2017-is relatively sharp after a year that was notable for how little global bond yields moved.

According to a report from Bloomberg, Chinese government officials at the senior level have "recommended slowing or halting purchases of U.S. Treasuries".

The US government bond market has repeatedly defied negative forecasts and last year the 10-year yield hit 2.63 per cent after hopes began circulating that President Donald Trump would turbocharge the US economy. Japan was second with USA bond holdings worth $1.09 trillion.

The U.S. trade deficit widened 3.2% (http://www.marketwatch.com/story/us-trade-deficit-swells-to-largest-since-january-2012-2018-01-05) in November to $50.5 billion, the largest gap since January 2012.

The S&P 500 pared some losses after falling as much as 0.6 percent after the report, which also pushed the dollar down.

Bitcoin tumbled another 10 percent after South Korea said it would move to ban cryptocurrency trading. The report cited two unnamed government sources. Australia's S&P/ASX 200 slumped 0.5 percent to 6,067.60.

The Institute for Supply Management's nonmanufacturing index fell 1.5 points to 55.9% (http://www.marketwatch.com/story/service-sector-growth-tumbles-in-december-ism-says-2018-01-05) in December, signaling a slowdown in the pace of expansion for services-sector activity.

The precious metals joined other commodities in moving higher on Wednesday morning thanks to a sharp drop for the US dollar and a massive sell-off of bonds. The euro advanced by the same margin against the dollar back to $1.20 but the pound sterling was flat at $1.35. There's a lot of talk right now about the high price of stocks and the length of the current rally, but even expert investors usually can't time the market.

OIL: The price of oil remained supported by optimism about the global economy and a recent decline in the value of the dollar, which makes it more appealing as an investor for non-dollar investors.

In a unusual case of "fake news" causing confusion among forex traders, the South African rand briefly jumped 1% after the recently lost US satellite happened to share a name, Zuma, with the country's president.

  • Wendy Palmer