China officials said to recommend slowing or halting purchases of U.S. Treasuries

Just what an already jittery bond market needs: reports that senior Chinese officials reviewing the country’s purchases or U.S. Treasuries have recommended slowing of halting that buying.

It’s not clear from these reports whether the recommendation is based on fears of a China/United States trade war, on weakness in the U.S. dollar, on readings of rising supply as the U.S. deficit is set to expand or other factors.

Those bond traders who are into whistling past the graveyard point out rightly that China’s buying of Treasuries has tapered off in recent years so a slowing of new purchases wouldn’t be a big deal for the Treasury market. I think that ignores the coming increase in Treasury issuance and the effects on the Treasury market of the Federal Reserve’s decision to start reducing the size of its own portfolio of Treasuries.

This morning the yield on the 10-year Treasury climbed another 3 basis points to 2.59% as of 11 a.m. New York time. The yield on the 10-year Treasury is now up 21 basis points in the last month. (It takes 100 basis points to make one percentage point.)