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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...

 

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Fri, 07/16/2010 - 10:32 | 473297 J.Caesar
J.Caesar's picture

never tickle a sleeping dragon - harry potter

Fri, 07/16/2010 - 10:45 | 473342 Duuude
Duuude's picture

 

Difenitely an imporbably cahrt.

 

Timmah !!!

 

 

Fri, 07/16/2010 - 17:08 | 474462 johngaltfla
johngaltfla's picture

Actually the expression is:

 

"Never pee on your central banker's leg and tell him you're watering his flowers."

Fri, 07/16/2010 - 10:32 | 473299 Cookie
Cookie's picture

Yes NYT, pull your finger out for once

Fri, 07/16/2010 - 12:12 | 473593 BobWatNorCal
BobWatNorCal's picture

"Hopefully someone with far more executive level access (NYT?) than us, will dare to challenge the status quo"
I think the NYT has groveled its way into the status quo. They're pretty shameless at framing agendas and averting eyes from stories that don't it the agenda these days....

Fri, 07/16/2010 - 13:29 | 473826 midtowng
midtowng's picture

You don't suppose something fishy could be going on, do ya? The big banks wouldn't be trying to manipulate the world's capital markets. That would be unethical.

Fri, 07/16/2010 - 10:33 | 473302 buzzsaw99
buzzsaw99's picture

The UK has long been suspected (by me at the least) of being a proxy for the fed.

Fri, 07/16/2010 - 11:11 | 473431 Quinvarius
Quinvarius's picture

Airstrip one is populated with our proletariat slaves.

 

 

Fri, 07/16/2010 - 11:18 | 473451 DaveyJones
DaveyJones's picture

Dead on - you buy my debt and I'll buy yours, that way, we'll both have money

Fri, 07/16/2010 - 11:44 | 473509 Horatio Beanblower
Horatio Beanblower's picture

The "special relationship"?

Fri, 07/16/2010 - 10:34 | 473304 grunion
grunion's picture

Liquidating some missing gold?

Fri, 07/16/2010 - 10:33 | 473305 Hdawg
Hdawg's picture

Rothchild's BOE of course

Fri, 07/16/2010 - 10:38 | 473321 Tense INDIAN
Tense INDIAN's picture

thats what i was thinking...

Fri, 07/16/2010 - 11:26 | 473464 Cheeky Bastard
Cheeky Bastard's picture

Brick Top: It'll get you in a lot of trouble thinking, Errol. If I were you, I wouldn't do too much of it.

Fri, 07/16/2010 - 11:24 | 473461 Cheeky Bastard
Cheeky Bastard's picture

Wow dude; I did not know this was 1875. Thanks for that.

Apparently the omnipotence of the Rothschild's knows no border. Say; did the Rothschild's spy network deliver Dow opening #s to Nathaniel before the FTSE Transatlantic mail ship could deliver it to other London Traders.

Fri, 07/16/2010 - 12:00 | 473553 Steak
Steak's picture

Cheeky...miss ya bro...in the most hetero way of course.  If your day needs a lil musiq, check check it: http://www.youtube.com/watch?v=3B3WquQ_PFc&feature=PlayList&p=F226CF2BB4D20A19&playnext_from=PL&index=1&playnext=1&shuffle=155

Fri, 07/16/2010 - 14:15 | 473988 Heavy
Heavy's picture

Huh, what's going on?  Oh, I see.  Where's my pitch fork?!

Fri, 07/16/2010 - 10:36 | 473313 Pimp Juice
Pimp Juice's picture

Don't you remember that we have a "special relationship" with Great Britain? Obama hasn't given Cameron any DVD's yet!

Fri, 07/16/2010 - 10:36 | 473314 Stepney
Stepney's picture

Ah, so that is where Tony B'Liar and Gordon 'snotgoblin' Brownstuff hid all our money.

We'll send a little man round to collect it later. Thank's old chap.

Fri, 07/16/2010 - 10:37 | 473318 kaiserhoff
kaiserhoff's picture

UK as in Baldy Ben.  Closing in on a tipping point as more folks catch on?

Fri, 07/16/2010 - 10:39 | 473326 Dr. No
Dr. No's picture

If the UK suspects their currency is going to dive faster than the dollar, wouldnt it make sense to buy the bonds?  I mean its not like they are hard to find with so many being issued by the US of A.

Fri, 07/16/2010 - 10:43 | 473337 Cognitive Dissonance
Cognitive Dissonance's picture

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.

It seems the smarter Chinese rats are leaving the dumber (or at least fat and happy) American rats behind. I've always been amazed when people would spout such nonsense about China being forced to purchase US Treasuries for as long as they wish to be a part of the global economy. How it's in their best interest to buy our crap US bonds.

China will always do what's in their best interest. If that coincides with America, great. If not, they won't. China learned during the so called Gun Boat diplomacy era that they never ever again wish to be in a situation where their best interest is determined by being on the wrong end of the barrel of a gun.

Fri, 07/16/2010 - 10:53 | 473374 LoneStarHog
LoneStarHog's picture

I have also had to laugh at the China bashing and "...they need us...".

I had also stated over the past several years that China was accumulating a vast hoard of gold, which was proved to be correct.

I have also stated that China learned a lesson from the U.S. Gold Swaps (read Fort Knox).  I posit that they have taken this and applied it to their U.S. Treasury holdings by SWAPPING treasuries for commodities, mines, etc...things priced in U.S. Dollars.

Whatever few unencumbered remaining U.S. Dollar Denominated Assets are held, the losses of a declining dollar will be offset by the rise in gold.

 

Fri, 07/16/2010 - 11:30 | 473481 imapopulistnow
imapopulistnow's picture

 

We think alike.

Fri, 07/16/2010 - 11:23 | 473459 DaveyJones
DaveyJones's picture

Let's see they're accumulating lots of gold and just about every other hard resource in the world, building lots of oil alternative energy and water systems, they actually manufacture things and are not swimming in debt up to their nostrils but yeah they need us cause we have Leonardo DiCaprio 

Fri, 07/16/2010 - 12:17 | 473609 Cognitive Dissonance
Cognitive Dissonance's picture

If they take Leonardo, I'm going Chinese in a heart beat. They can take my dollars, my hard asset oil/gas/lumber etc resources, my PM's, even my wife. But if they take Leonardo, I'm renouncing my US citizenship, finding me a Chinese concubine and moving to China. :>)

Say it ain't so Leonardo, say it ain't so.

Fri, 07/16/2010 - 10:43 | 473338 EscapeKey
EscapeKey's picture

"I buy yours, you buy mine"

Fri, 07/16/2010 - 10:51 | 473367 MarketTruth
MarketTruth's picture

+1

Fri, 07/16/2010 - 11:00 | 473409 Ripped Chunk
Ripped Chunk's picture

69

Fri, 07/16/2010 - 11:30 | 473479 DaveyJones
DaveyJones's picture

666

Sun, 07/18/2010 - 20:29 | 476358 1fortheroad
1fortheroad's picture

You buy mine and I promise to buy yours later.

Fri, 07/16/2010 - 10:43 | 473339 Ancona
Ancona's picture

This is clearly stealth quantitative easing, just as the Carribbean banking centers purchases are. There just is not that much cash out there looking for low yield returns.

 

 

Fri, 07/16/2010 - 10:45 | 473343 Quintus
Quintus's picture

Man, you guys are so lucky that we in the UK continue to fund your country like this.  Now, about that BP business...

Of course it suits us too as there's so much excess money lying about over here that the banks have stopped putting pre-approved credit card applications through our doors, and are now just stuffing cash through the letterbox every day.

I don't know who's buying Treasuries out of London, but I can only imagine it's the Fed acting through intermediaries.

Fri, 07/16/2010 - 10:54 | 473377 buzzsaw99
buzzsaw99's picture

Man, you guys are so lucky that we in the UK continue to fund your country like this.  Now, about that BP business...

 

Yeah, let's talk about it.

Fri, 07/16/2010 - 10:47 | 473350 sbenard
sbenard's picture

Folks,

ECRI just hit -9.8% minutes ago.

It's a hair's breadth from calling a new recession!

Fri, 07/16/2010 - 11:27 | 473466 zaknick
zaknick's picture

Yay

Fri, 07/16/2010 - 10:48 | 473352 Ragnarok
Ragnarok's picture

I wonder if Bernanke has picked up an english accent yet?

Fri, 07/16/2010 - 10:48 | 473353 NOTW777
NOTW777's picture

yeah but cnbc is celebrating "obama wins"

Fri, 07/16/2010 - 10:49 | 473355 4shzl
4shzl's picture

. . . just who is doing all this "UK-based" buying?

Albania.

What do we know about them?

Nothing. They're stand-offish . . .

 

Fri, 07/16/2010 - 12:37 | 473680 Gwynplaine (not verified)
Gwynplaine's picture

I just hope this doesn't jeopardize the B-3 bomber program.

Fri, 07/16/2010 - 10:52 | 473368 centerline
centerline's picture

I'd consider it a hedge against currency devaluation in light of what is going on.  BUT, that is simply too big a play.  Like going "all in."  So, if it walks like duck, talks like a duck...

Fri, 07/16/2010 - 10:57 | 473390 lizzy36
lizzy36's picture

One can visualize  ARS asking "the right people the right questions,  as soon as he finishes swallowing.  

Fri, 07/16/2010 - 12:00 | 473550 Steak
Fri, 07/16/2010 - 10:59 | 473399 Paper CRUSHer
Paper CRUSHer's picture

So that's why HAINES 'n HOBBS are wearing their Country-Ties this morning to CNBC in an all out inexorable display of "UNITED STATES WE STAND UNITED KINGDOM WE FALL"


 

Fri, 07/16/2010 - 11:00 | 473406 Instant Karma
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"This is increasingly appearing as shadow Fed debt monetization operation, operating out of the United Kingdom."

Yup.

Fri, 07/16/2010 - 11:04 | 473417 buzzsaw99
buzzsaw99's picture

An old Greedspasm trick.

Fri, 07/16/2010 - 11:11 | 473432 bigdumbnugly
bigdumbnugly's picture

is there a bastille anywhere in the DC area?

i feel like a little stormin'.

Fri, 07/16/2010 - 16:00 | 474318 Heavy
Heavy's picture

Getttt yer pitchforks here!  I got pitchforks who whats 'em!  (and BTW what do you have in barter?)

Fri, 07/16/2010 - 11:13 | 473438 DaveyJones
DaveyJones's picture

"We are a rather surprised that this morning's stunning Treasury International Capital report has not gotten far more prominent attention"

that was sarcasm, right?

Fri, 07/16/2010 - 11:19 | 473452 luigi
luigi's picture

It seems the world is schrinking fast to the size of USA+UK.

In pretending all is still business as usual we could re-introduce the concept of the earth being flat and, that there is an edge beyond the strait of Gibraltar... no, let's say beyond the southernmost end of the channel, which shall not be surpassed lest you fall in the void for ethernity.

I would also burn on a pyre all those pretending that that mysterious hole opening in the earth close to the white cliffs is a door to a vast continent beyond the foggy sea where people speak a curios language called french: just close this opening by a giant stone and draw a pentacle in the soil in front of it and fill all the area with spell and courses against those who will dare re-opening the passage...

Fri, 07/16/2010 - 12:05 | 473570 Diogenes
Diogenes's picture

They're all wogs east of Calais. Old English saying.

Fri, 07/16/2010 - 11:20 | 473453 M4570D0N
M4570D0N's picture

I realize the amount pales in comparison to China/Japan/UK/etc. but I found it interesting that Egypt has more than doubled it's holdings from July 2009 from $12.7B to $28B, up from $21.1B in just the prior month. It's also nearly triple from June 2009 level at $11.5B according to the "New Series."

France has also more than doubled from July 2009, from $17.5B to $36.4B

The biggest change I see though (other than what has been mentioned already), is Canada. It's up 3.5x since july 2009 from $24.1B to $85B, and 3.7x from June 2009 which was at $23B. I'm not entirely clear what the difference between the new series and old series is, but it has more than quadupled (4.62x) since June 2009 according to the old series figure.

 

Fri, 07/16/2010 - 11:21 | 473458 b_thunder
b_thunder's picture

Brian Sack of FRBNY was in the Cayman Island for an R&R, and decided to open a trading outpost there. 

Fri, 07/16/2010 - 11:30 | 473480 cymro33
cymro33's picture

 

UK is the puppet of the US. Remember Blair and IRAQ, Brown and gold. UK has been bankrupt a long time ago.

Fri, 07/16/2010 - 11:33 | 473483 IE
IE's picture

WOW ... look at those UST rates today ...

5-Year Treasury 1.68 -0.061 -3.50%

 

10-Year Treasury

2.93 -0.048 -1.61%

 

30-Year Treasury

3.952 -0.016 -0.40%
Fri, 07/16/2010 - 11:40 | 473497 luigi
luigi's picture

Special price for UK friends?

One must love the U.S. very much to buy T-bonds at those rates (or being made an offer one could'nt possibly refuse...)

I wonder how the greek bonds would sell if they too were in the position to make some Soprano's-economics... 

Fri, 07/16/2010 - 11:37 | 473490 MrTrader
MrTrader's picture

Yadda, yadda, yadda. Anyone took a look at the government bondy rally in May ? Anyone recalling the "flash crash" ? Ergo : the Chinese got rid off some inventory. They will be back in June. I promise...:=)

Fri, 07/16/2010 - 11:42 | 473501 ejmoosa
ejmoosa's picture

How much of this debt is held by US citizens?

I would like the rest of the world to quit buying this debt, enabling our leaders to spend like the drunken Congressmen they are.

Sell it directly to the American people, like war bonds were sold.  And if we are not buying, then it will be a clear sign that we do not want it!

 

Fri, 07/16/2010 - 12:08 | 473584 Diogenes
Diogenes's picture

Or that they haven't got any money. Do you remember the motto "We owe it to ourselves" as in "What's the difference how big the national debt gets, we owe it to ourselves." That rationalization ceased to be operational fifty years ago.

Fri, 07/16/2010 - 13:18 | 473791 BurritoGas
BurritoGas's picture

From what I gather:

Technically we are the biggest holders of our own debt.

By that, I mean, the Federal Reserve holds roughly 5 trillion dollars of US Treasury and debt instruments. The next biggest one is China and so on.

Fri, 07/16/2010 - 11:43 | 473508 Cindy6
Cindy6's picture

and if it is China, as is widely rumored, why was there an increase in Bill holdings?

I don't get this. How does an increase in ST holding proves that it's not China? Isn't it in China's interest that their UST position is not transparent to other market players?

I'm not saying China did not dump UST last month. In fact, given the recent change in the currency regime, I positively expect them to switch some reserve to Yen and Euro. It's just that there's no proof that UK's holdings is not China's by proxy.

 

Fri, 07/16/2010 - 11:48 | 473521 GoinFawr
GoinFawr's picture

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

Curious, anybody have any ideas as to what they could dumping them in exchange for?

I've got a couple, but they seem a bit too obvious...

Regards

Fri, 07/16/2010 - 12:15 | 473604 Diogenes
Diogenes's picture

What if they are not selling so much as not buying? A couple of years ago they stopped buying the 30 year, then the 20, then the 10. By the beginning of this year they were only buying 3 month and 6 month.

Meanwhile as the old bonds fall due they can cash them in without causing a panic.

In this way they hope to collect as much as they can before the whole thing blows up.

Meanwhile instead of buying securities they are spending their US dollars on gold, Canadian oil resources, African farm land, mines around the world and other inflation proof assets.

Sat, 07/17/2010 - 07:35 | 475184 Neo-zero
Neo-zero's picture

+100

We have to understand how the Chinese operate.  They are true longterm thinkers unlike us over here in instant gratification land.  Let the bonds rollover, nothing to see here move along as we buy up things that will be worth something after Obama's done helping us down a couple of financial flights of stairs head first in the name of redistribution.

Fri, 07/16/2010 - 11:50 | 473526 Bluntly Put
Bluntly Put's picture

Tradeoff, treat BP with kid gloves and the kindness is reciprocated?

Fri, 07/16/2010 - 12:03 | 473567 Wheatman
Wheatman's picture

Amazing Tyler. This spells disaster after the deflationary period. Because after the world liquidates private debt, the US treasury market must collapse and usher in the end of western civilisation as we know it. Revelation 6:6

Fri, 07/16/2010 - 12:11 | 473580 THE DORK OF CORK
THE DORK OF CORK's picture

I think too much attention is given to the top 3 big holders.

For instance between Taiwan , Luxembourg and Ireland there was $250.5 million of Treasuries in their jurisdictions this May - and speaking from a Irish perspective this state had absolutely no say in the volume and direction of these securities.

www.ustreas.gov/tic/mfh.txt     

Fri, 07/16/2010 - 12:37 | 473679 amanfromMars
amanfromMars's picture

Blighty Boffinry, which are in the UK, Ab Fab Lab Rats about which you are not cleared with the necessary need to know security, nor would you be intellectually well enough equipped to deal with the information and intelligence concerned and developed, is Beta Field Testing a Novel and Noble Virtual Reality Meme which Overcomes and Replaces Seamlessly and/or Stealthily if you prefer or would require the more Astutely Attentive AIMODified version's Attentions, Corrupted and Abusive Operating Systems.

And that is all that you will ever be likely to hear on the matter such are the sensitivities and abilities of the Program and its Targeting Projects Portfolios.

And you can fully expect further improbable trades to reflect what is recognised as a paradigm shift and game-changer in the field.

 

Fri, 07/16/2010 - 12:45 | 473700 THE DORK OF CORK
THE DORK OF CORK's picture

Tell me is Hellas Planitia a good place to get away from it all - this rape and pillage is good fun and all but it can become tiresome after the first 10 Trillion.

Fri, 07/16/2010 - 13:57 | 473938 Grand Supercycle
Grand Supercycle's picture

 

The DOW/SP00 leg down has started.

http://stockmarket618.wordpress.com

Fri, 07/16/2010 - 15:49 | 474288 RockyRacoon
RockyRacoon's picture

No shit.

Fri, 07/16/2010 - 16:03 | 474323 Heavy
Heavy's picture

We can't poop anymore!?  That is going to be bad.  Almost as bad as this monetary revolution business.

Sat, 07/17/2010 - 00:12 | 475004 Youri Carma
Youri Carma's picture

Seems like that the U.K. and the U.S. are the Crazy Siamese Twin and that the war of the U.S. against Iran (if) will not be parried by the Chinese on the fysical battlefield but the financial.

Mon, 07/19/2010 - 10:18 | 476813 PrinceDraxx
PrinceDraxx's picture

Can't you guys recognize a game of 3 Card Monte?

Tue, 07/20/2010 - 03:57 | 478335 Hunch Trader
Hunch Trader's picture

"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!"

 

The chart shows very clearly a continuing INCREASING trend in bonds?

 

Only amount of bills has dropped.

 

So, belief in long term interest rates over short. Deflationary expectation.


Sat, 02/12/2011 - 01:53 | 955276 shawnlee
shawnlee's picture

Seems like that the U.K. and the U.S. are the Crazy Siamese Twin and that the war of the U.S. against Iran (if) will not be parried by the Chinese on the fysical battlefield but the financial.70-649 \ 642-384 \ 642-974 \ 640-863 \ 642-436

Fri, 02/25/2011 - 08:08 | 996450 george22
george22's picture

Man, you guys are so lucky that we in the UK continue to fund your country like this. Now, about that BP business...

Of course it suits us too as there's so much excess money lying about over here that the banks have stopped putting pre-approved credit card applications through our doors, and are now just stuffing cash through the letterbox every day.

I don't know who's buying Treasuries out of London, but I can only imagine it's the Fed acting through intermediaries.

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