China: U.S. Treasury Market 'Very Important' (TUZ, CYB, GLD)

Stating that the "U.S. Treasury market is a very important market for China," the Chinese State Administration of Foreign Exchange Wednesday ruled out the "nuclear" possibility of dumping U.S. debt. The PIMCO 1-3 Year U.S. Treasury Index Fund

is up slightly in afternoon trading. In a series of questions and answers posted on its website, Chinese leadership outlined its policy on $2.45 trillion in reserve holdings. Notoriously secretive in its investment strategy, China maintains a dominant role in a number of markets, including U.S. Treasury debt. It noted that the United States must maintain budgetary constraint, but reiterated its confidence in U.S. assets. "The U.S. Treasury market is the world's largest government bond market, and U.S. Treasury bonds deliver good security, liquidity and market depth with low transaction costs. See Some of the Top Moving Indexes

China held over $900 billion in U.S. debt at the end of April. With such an elevated percentage of U.S. obligations held by the Chinese, budget hawks worry about the possibility of an economic "nuclear bomb." The untold implications of a debt dump by China would wreak havoc on the U.S. economy and world markets. WisdomTree's Dreyfus Chinese Yuan Fund

, which provides exposure to movements in the Chinese Yuan relative to the United States dollar, is up today. Concerning its investment policy in gold, China remained relatively tepid at increasing its holdings. "It cannot become a main channel for investing our foreign exchange reserves," noting that prices can be volatile. The SPDR Gold Trust

is trading up close to 1% this afternoon. Because the market for gold is supply limited, the State Administration of Foreign Exchange (SAFE) remains weary about boosting its gold reserves. "SAFE will never be a speculator. It mainly seeks to protect the safety of China's [foreign exchange] reserves and ensure a stable investment return," it said.