Chinese Treasury Dump Brings Its Total Holdings To One Year Low, As "UK" Continues Exponential Accumulation Of US Bonds

Tyler Durden's picture

We are a rather surprised that this morning's stunning Treasury International Capital report has not gotten far more prominent attention. The reason: in it we read that in May 2010, China dumped $33 billion in Treasuries, bringing its total to the lowest since June 2009. Furthermore, Japan also offloaded $8.8 billion in bonds, as did the Oil Exporters. Yet total foreign Treasury holdings increased from $3,957 billion to $3,964 billion almost exclusively as a result of ongoing exponential UK accumulation. It is time someone in the mainstream media asked just who is doing all this "UK-based" buying? It is not hedge funds, which operate out of Caribbean Banking Centers, and which saw an increase in holdings from $151.8 billion to $165.5 billion as risk went completely off in the month of May courtesy of the Flash Crash, Greece, and the general insolvency of Europe. It is also not China due to a diverging pattern in Bills accumulation versus disposition. Additionally, May saw a dramatic decline in total foreign purchases of total US assets, dropping from $110.3 billion to just $33 billion, with Corporate Bonds and Corporate Stocks seeing a rare monthly sell off ($9 billion and $432 million).

Below is a chart of total Long-Term securities purchased by foreigners monthly:

Notably, foreigners sold US Corporate Bonds for the first time since February 2009, after $432 million in bonds were sold:

So cutting to the chase, the key observations as always were in the holdings of the top 3 - China, Japan and the UK. As noted previously, China dumped $32.5 billion worth of bonds, which consisted exclusively of US Bills selling to the tune of $35.4 billion, even as the country bought a nominal $2.9 billion in Bonds.

The selloff has resulted in Chinese bond holdings dropping to the lowest since June 2009, and their Bill holdings, at just $7 billion, to the lowest ever!

But China was not alone: Japan also dumped USTs - a total of $8.8 billion, although unlike China, Japan sold $11.1 billion in Long Term Bonds even as it bought $2.4 billion in Bills.

Yet in what is (and continues to be) the most perverse observation, that proceeds without any questions from the mainstream media, the otherwise broke UK, once "bought: a stunning amount of Bonds, or just over $28 billion in the month of May, consisting of $27 billion in Bonds, and $1.3 billion in Bills. The "UK" accumulation patterns continues growing in an exponential pattern, and the country which owned "just" $180 billion in USTs in December, has doubled its holdings to $350 billion in less than half a year.

And here is the most imporbably chart we have seen in a long time:

This is not hedge fund accumulation, as Caribbean Banking Centers, traditionally the locus of HF accumulation saw a $14 billion increase in May, and if it is China, as is widely rumored, why was there an increase in Bill holdings? This is increasingly appearing as shadow Fed debt monetization operation, operating out of the United Kingdom. Hopefully someone with far more executive level access (NYT?) than us, will dare to challenge the status quo, and facilitate their credibility and book sales, by asking the right people the right questions to explain this confounding observation...