Political developments roil currency markets
Treasury yields are climbing and the dollar is under pressure after Bloomberg reported that Chinese regulators have instructed the country’s commercial banks to cut their holdings of American government debt, noting threats posed by “concentration risks and market volatility”. According to the report, officials verbally advised financial institutions to reduce new purchases and scale down existing positions in recent weeks. Benchmark ten-year yields are up five basis points, and the trade-weighted dollar is down roughly half a percent. The policy shift is less dramatic than the headline suggests—implying that the kneejerk market reaction should fade—but is important nonetheless. Even when...