Stories are circulating (Bloomberg) about China selling some of its holdings of U.S. treasury debt.  The actions are being taken to raise capital to support the Yuan after the initiative devaluation steps.  China holds an estimated $1.5 trillion of U.S. treasury debt and total foreign holdings are estimated to be close to $3.7 trillion.

More supply could put upward pressure on rates, outside of policy moves by the Fed.  While not significant yet, this could be why the rate on the benchmark 10-year treasury is mostly unchanged following the swift market decline over the past two weeks. If China becomes more aggressive with its selling, this could result in an effective rate increase for our economy.

We will be watching for indications of further selling and /or movement in rates higher.  Rising rates could have an impact for many assets in addition to bonds, including utilities, REITs and housing.  In light of the historically low rate environment, we have attempted to limit our overall exposure to assets that might have the most rate sensitivity.

Bradley Williams

Chief Investment Officer

Lowe Wealth Advisors is an SEC registered investment adviser that maintains a principal place of business in the State of Maryland. The Firm may only transact business in those states in which it is notice filed or qualifies for a corresponding exemption from such requirements. For information about the registration status and business operations of Lowe Wealth Advisors, please consult the Firm’s Form ADV disclosure documents, the most recent versions of which are available on the SEC’s Investment Adviser Public Disclosure website at www.adviserinfo.sec.gov. 

This commentary is intended for the dissemination of general information regarding market conditions to Lowe Wealth Advisors clients. The information contained herein should not be construed as personalized investment advice. Past performance is no guarantee of future results, and there is no guarantee that the views and opinions expressed in this report will come to pass. While any general market information and statistical data contained herein are based on sources believed to be reliable, we do not represent that it is accurate and should not be relied on as such or be the basis for an investment decision. Any opinions expressed are current only as of the time made and are subject to change without notice.