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China is reportedly thinking of halting US Treasury purchases and that's worrying markets right now

Fred Imbert
President Donald Trump said Wednesday he has asked China to develop a plan to reduce the current trade deficit between the two countries by $1 billion.

China , the United States' biggest buyer of sovereign bonds, could be slowing down or even halting its purchases, according to a report.

Bloomberg News reported Wednesday, citing people familiar with the matter, that officials in Beijing have recommended the Chinese government lowers — or even stops — its buying of U.S. sovereign debt.

The report also notes that Chinese officials think U.S. debt is becoming less attractive compared to other assets, adding that trade tensions between the two countries could provide a reason to slow down or halt the purchases.

The news is worrying markets.

Treasury prices fell, boosting yields. The U.S. dollar also fell vs. most currencies and gold increased.

Dow futures were down more than 110 points.

A taper in Chinese purchases would come as the Federal Reserve unwinds the massive balance sheet it amassed following the financial crisis. The Fed is also expected to raise rates three times this yeay. In 2017, the central bank also hiked rates three times.

The U.S. 10-year yield rose to 2.59 percent on Wednesday, hitting levels not seen since last March. The dollar also fell against a basket of major currencies, trading down 0.6 percent at 91.96.

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