Why has Russia dumped most of its US debt?

Russia has rapidly sold off the vast majority of its American debt holdings, raising questions over whether the move is part of a wider political strategy to destabilise the US economy.

Between March and May this year, Russia’s holdings of US Treasury bonds plummeted by $81 billion, representing 84% of its total US debt.

The sudden debt dump may have contributed to a short-term spike in Treasury rates that spooked the market, but “it also sparked a guessing game about Moscow's motivations” says CNN Money.

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Some analysts have seen it as a direct response to Washington’s crippling sanctions, while others claim it is merely part of a central bank policy to divest its portfolio.

Either way, with 10-year Treasury yields falling back below 3% it appears there has been little long-term impact to the US economy.

But while Russia is not a leading holder of US debt, the speed of the move to divest has raised questions about what were to happen if China, the US’s biggest creditor, were to suddenly follow suit.

Beijing currently holds about $1.2 trillion of US debt, ten times that of Russia, and fears it could use its holdings as leverage have only been heightened by America's soaring federal budget deficit and the ongoing trade war with China.

“But analysts question the logic behind this worry” says CNN, adding that “China would struggle to unload that much debt at once - and its own portfolio would dramatically lose value during such a fire sale”

“The idea of weaponising foreign-exchange holdings for an economic attack on the United States is just as likely to hurt the weaponeer,” Janney's LeBas told the news channel.