And Some Media Propaganda Of Our Own...

Tyler Durden's picture

Earlier, when we penned the post "In Anticipation Of Our Own "Department Of Truth" we disclosed some very blatant examples of media  manipulation by the Chinese propaganda bureau. We left that piece with an open ended query of when we may see comparable "information" massaging in the U.S. We didn't have to go too far to demonstrate a rather clear domestic example. A recent article by Bloomberg's Susanne Walker and Wes Goodman titled "China Adding to $1 Trillion of U.S. Debt Caps Rise in Rates" made the following bold statement: "Investors outside the U.S. have boosted their holdings of
longer-maturity Treasuries to the highest level since the credit markets
froze in 2008, helping curb rising yields amid concern inflation is
accelerating." The data massaging, in case it is not clear, has one goal only: to instill the reader with the impression that foreign buyers are stepping in to buy US debt, despite inflation concerns, and make the role of the Fed's relentless monetization of virtually all US gross debt issuance seem less relevant in response to the recent letter by Bill Gross highlighting precisely the opposite. The authors go on to say: "The shift toward long-term debt shows bond buyers outside the U.S. agree
with Federal Reserve Chairman Ben S. Bernanke’s assessment that
inflation will be contained even as global food and energy prices soar.
Bill Gross, who runs the world’s biggest bond fund at Pacific Investment
Management Co., warned last week that yields on Treasuries are too low
with inflation accelerating and the central bank planning to complete
$600 billion in asset purchases in June." Alas in their attempt to validate their thesis Walker and Goodman make the blatant mistake of comparing Chinese holdings data from before and after the just announced TIC data holdings revision. To wit: "China, the largest investor in U.S. government debt after the Fed,
increased longer-term notes and bonds by 39 percent to $1.145 trillion
in December from a year earlier,
while its stake in bills declined 78
percent to $15.4 billion, the most recent Treasury data show." Alas, in making that statement, it confirms how clueless the authors are in interpreting ever critical Treasury data. We can only hope this error was made without premediation, or else we can now conclude that the Department of Truth is now actively manipulating "data" in our own backyard, to reach pre-determined goalseeked conclusions.

What is the basis of these allegations?

As Zero Hedge disclosed on February 28, Treasury International Capital reported that it was adjusting Treasury holdings, which were for most part static, except for holdings of China and the UK, with $268 billion being added to the previous Chinese holdings of $891.6 billion making the new total $1,160 billion, while UK holdings declined by $269 billion to $272 billion (we are convinced this number will be further revised in the future).  The fine print here, however, is that anyone who would take a mere 2 minutes to read the heading of the relevant TIC table, would find out that the revised Treasury number applies only for holdings from June 2010 onward, while everything before June 2010 is based on the old data series. And even a first year analyst at Bank of America knows that comparing and presenting pre- and post-revision data for public consumption is immediate grounds for termination (or an indication of extremely sloppy editorializing).

Readers are encouraged to check the source data indicating the variance between the "New Series" and the "Old Series" at the following link.

In other words, the farthest back one can possibly go back using the most recent data is June 2010, when the revised data begins. Bloomberg, however, completely ignored this, and based its entire article which somehow was supposed to confirm that foreign investors are not concerned about US inflation, and thus are adding to their holdings in droves, based on apples and oranges data.

What would the data look like if Blomberg had used a data series that is actually apples to apples, so that the December 2009 Chinese holdings of $894.8 billion data point is applicable?

Here is what Treasury data looked like pre-revisions (which includes the June 2009 and prior data as per the revised "Old Series" - luckily Zero Hedge now archives all obsolete, pre-revision government data just for these situations):

What is rather apparent is that instead of a surge from $894.8 billion to $1,160.1 billion, or a 30% increase in Chinese holdings, as incorrect as it may have been derived, using just the old data series, Chinese holdings actually declined to $891.6 billion! Of course, this calculation is also irrelevant as the US Treasury revised holdings halfway through the year, and therefore neither of these comparisons are actually relevant any longer.

But for the sake of argument, here is how the balance, and a refutation of the balance, of the Bloomberg 'hopefully not propaganda' piece would look like if one assumes that the apples to apples version is the appropriate one.

Version A - as it was written:

The nation bought more U.S. bonds even as its leaders criticized Bernanke’s plan for the Fed to buy $600 billion of Treasuries by June. Jesse Wang, executive vice president of China Investment Corp., the country’s $300 billion sovereign wealth fund, said Jan. 15 that devoting too much of its reserves to U.S. assets such as Treasuries was too risky.

“They remain extremely supportive for the Treasury market,” said Priya Misra, head of U.S. rates strategy at Bank of America Merrill Lynch in New York, one of the 20 primary dealers that trade with the Fed.

Version B - as passed through the Zero Hedge propaganda filter:

The nation did not buy more U.S. bonds because its leaders criticized Bernanke’s plan for the Fed to buy $600 billion of Treasuries by June. Jesse Wang, executive vice president of China Investment Corp., the country’s $300 billion sovereign wealth fund, said Jan. 15 that devoting too much of its reserves to U.S. assets such as Treasuries was too risky.

“They do not remain extremely supportive for the Treasury market,” said Priya Misra, head of U.S. rates strategy at Bank of America Merrill Lynch in New York, one of the 20 primary dealers that trade with the Fed.

As usual our warning stands: trust nothing you read in mainstream media. Unfortunately, as incidences of such data drift increase, one can be become very confused where the Department of Chinese Truth begins, and where the Department of US Truth ends...

PS While we have Bank of America head of rates Priya Misra on the line, we were hoping she could tell us how much of the upcoming BofA dividend will be funded from spread differential and capital appreciation on the bank's daily POMO activities courtesy of its Primary Dealer status. See, our monocultured pleadings for further disclosure in this matter have so far fallen on deaf ears, and we see Ms. Misra enjoys communicating with the media on topics she is well versed in.