The Curious Case Of Bloomberg's Persistent Treasury "Demand" Disinformation Campaign

Tyler Durden's picture

Less than a month ago, Zero Hedge thoroughly debunked an article written by Bloomberg's Susanne Walker and Wes Goodman, titled "China Adding to $1 Trillion of U.S. Debt Caps Rise in Rates" which had one purpose only: to eliminate public panic arising from the imminent removal of the Fed as a buyer of first and last resort, and attempt to convince naive readers that China is in fact adding to its holdings. 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."
As we showed previously this statement was based on a completely unfactual apples to oranges comparison of pre and post-revision TIC data, further showing that if the authors had conducted their analysis properly it would have actually shown a decline in China's Treasury holdings in a 12 month period. Then in a development so ironic it would even make Alanis Morisette blush, we disclosed the very next day that Bill Gross dumped all of his Treasury holdings, pending an answer to the question of "who will buy US Treasurys once the Fed stops monetizing", immediately refuting Bloomberg's "all is rosy on the foreign front" argument, reinforcing our thesis that with the Fed gone, foreigners will promptly cease to co-bid alongside the bidder of biggest resort, and in essence ending any artificial attempts to make the US paper demand picture any better. Yet today, less than a month later, Bloomberg's Daniel Kruger, in an article titled "Fed Exit Means No Pain for Obama as Foreigners Buy 60% of Notes at Auction" repeats precisely the same mistakes as his colleagues which we have since corrected, cheery picks some other data, and goes on to present a goalseeked argument to a conclusion that once again appears to have come from "above." Frankly, we are stunned by this persistence to refute Bill Gross' (not to mention Zero Hedge's) factually based view that foreign demand is declining materially for US bonds, and without QE3, it is very possible that it may disappear entirely. So allow us to debunk Bloomberg's second attempt (which we again hope is merely a function of misunderstanding of the subject material) at outright factless spin.

First, Kruger repeats the same mistake as his colleagues Walker and Goodman did less than a month ago, and which we took the time to correct:

Foreign investors owned $4.45 trillion of Treasuries as of January, up from $3.7 trillion a year earlier, according to the government. China, the largest overseas lender to the U.S., held $1.15 trillion of the debt in January, up from $889 billion a year earlier. Japan’s stake grew 16 percent to $885.9 billion.

Since apparently nobody is aware that the TIC data is revised on a periodic basis, we will again present how the data looked like pre-revision. From our previous post:

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):

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.

Hopefully this is merely a trivial mistake, although by now we would think Bloomberg editor Dave Liedtka (who oddly edited both articles yet appears very much inexperienced in dealing with Treasury data) would have at least a rudimentary understanding of TIC data.

Yet where the Kruger article gets into cherrypicking data is what really disappoints us and makes us truly wonder about the objectivity of Bloomberg. Kruger says: "The class of investors that includes foreign central banks
purchased 60 percent of the $66 billion in benchmark 10-year
U.S. notes sold this year, up from 42 percent in 2010
. Fed data
show banks have increased their holdings of Treasuries to the
most since December, as a panel of bond dealers and investors
that advises the government says lenders may double their stake
to $3.2 trillion in 2016." Kruger is correct about the take down of the 10 Year auction, however, he ignores to mention that it is skewed far higher due to the outlier February auction in which Indirects took down a record 71.3%. An in fact in during the QE2 regime (from September 2010 when QE2 was priced in, through March 2010), the 10 Year has averaged a far more modest 53.6% average purchasing rate (take down). And just like in late 2009, early 2010, the foreign take down for the 10 Year is starting to drop precisely on expectations of the end of quantitative easing (not teh plunge from September 2009 to January 2010).

Next, and this is far more grievous, Kruger completely fails to mention that the Indirect take down of all other bond maturities is far lower than the 10 Year as the below chart demonstrates.

Indeed, while foreigners have an interest in the 10 Year, it is more than offset by a lack of interest in the short-end of the curve. Average indirect take downs in 2011 of the 2 Year are 30.4%, of the 3 Year: 33.8%, of the 5 Year: 40.5%, of the 7 Year: 50.4%, and of the 30 Year: 40.7% - confirming that pretty much everywhere across the curve except at the 10 Year position the Fed is the primary buyer. Alas, you will not find this far less than flattering data anywhere in Kruger's analysis.

But where Kruger's analysis falls completely on its face is when looking at Treasury securities held in custody for foreign officials and international accounts, or specifically the place where the bulk of foreign purchases are parked: this is also the best place to get information on weekly foreign demand for US paper, since the Treasury International Capital is not only inaccurate, but comes out with a three month delay. And here is where the data gets really ugly.

Let's cut straight to the chart:

The chart really says it all: in the three months of 2011, foreign demand has been the "flattest" since the start of the financial collapse. Comparing the change in holdings from December 31, 2010 ($2.618 trillion) through March 31, 2011 ($2.637 trillion) shows a negligible increase of just $19.5 billion, or less than $7 billion per month! This pales even in comparison with the same anemic period from last year when this account changed by $54.9 billion. We wonder if Mr. Kruger can explain to us how a $7 billion run rate in UST purchases per month will sustain the $1.5 trillion in annual debt issuance to fund ongoing US deficits.

In addition, Mr. Kruger's analysis also completely ignores that in addition to gross issuance there are things called "redemptions" by the Treasury, or maturing bonds which constitute a cash outflow, an undetermined amount of which goes to Foreign lenders. Alas while it is impossible to break it down by how much Indirects received from the Treasury in maturing debt, we do know that of the $534 billion in gross issuance in 2011, "only" $339 billion was a net cash inflow to the Treasury, or net issuance. In other words $194.8 billion, or 36.5% of total, was redemptions! But this one will also not find mentioned in Mr. Kruger's piece, and this could easily skew the answer and explain why there was any interest in the 10 Year to begin with (or any other maturity).

But all of this really is moot as it only looks at primary market analysis, whereas as we wrote yesterday, the bulk of the action is and has always been in the secondary market, where the Fed monetizes debt on a daily basis via POMO. And here, as Zero Hedge demonstrated yesterday, a whopping 83.4% of net issuance (which is the correct number to look at, not the gross, or not net of maturities) since the start of QE2 has been monetized by the Fed. No if, ands, or buts. And no spin by any mainstream media can change this stone cold fact.

The bottom line is that when one removes the noise, the propaganda, and the misinformation, foreign interest in US Treasurys is dropping, and the Fed is a net buyer of more than every 8 out of 10 bonds issued.

We certainly expect foreign interest to plunge once (if) it is definite that QE3 is not coming. Yet that won't be the end of the world: interest will surely be there.... At a price. We expect that in the absence of QE2, the 10 Year to be fairly priced about 200 bps wide of where it is trading now, somewhere in the 5.50% range. Which, incidentally, will lead to a complete devastation in the US housing market, a plunge in short-end prices, a huge bear flattening in the market, and the next financial system collapse.

But something tells us Mr Kruger won't write about this particular story (nor will his "editor" David Liedtka be asked to edit on it.)

In the meantime, Zero Hedge will be happy to consult with any and all Bloomberg authors on the matter of Treasury issuance, a topic which it seems very few there have much if any experience with.

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JW n FL's picture

No... NO!!! We Export our Treasury Notes!!! Just like we export our inflation!! this cant be true?? My eyes!! My EYES!!!

prophet's picture

jw, good to "see" you and hope you don't mind me jumping in here

Has an e-mail been sent to the reporters explaining the views expressed here and offering them a chance to dig a little deeper and/or respond with their take on the views expressed here?

asdasmos's picture

This is all I could get from Bloomberg, then Bill sold all the bonds soon after. (Read from bottom to top.)


On Tue, Mar 8, 2011 at 3:05 PM, DAVID LYNCH, BLOOMBERG/ NEWSROOM:> wrote:


yup. saw it. about 100 years ago, i used to work for the local paper in gross's area and got up at 4am one morning to spend a day watching him work. he's a very interesting guy.




----- Original Message -----
From: <asdasmos>
At:  3/08 18:03:27


No worries and thank you for taking the time to respond,

I am not so sure that I would take too much from a study from the institution under question, even if it is the almighty Fed. With that in mind, I believe you might be familiar with Bill Gross of PIMCO and would consider him have extensive knowledge in this area.

If you have the time, I would highly recommend his March Investment Outlook here;

*Quick quote from the piece:*
    What I would point out is that Treasury yields are perhaps 150 basis points
    or 1½% too low when viewed on a historical context and when compared with
    expected nominal GDP growth of 5%. This conclusion can be validated with
    numerous examples: (1) 10-year Treasury yields, while volatile, typically
    mimic nominal GDP growth and by that standard are 150 basis points too low,
    (2) real 5-year Treasury interest rates over a century’s time have averaged
    1½% and now rest at a negative 0.15%! (3) Fed funds policy rates for the
    past 40 years have averaged 75 basis points less than nominal GDP and now
    rest at 475 basis points under that historical waterline.

Much Appreciated,



    On Tue, Mar 8, 2011 at 1:59 PM, DAVID LYNCH, BLOOMBERG/ NEWSROOM: <> wrote:


    thanks for your note. sorry it took me a day to respond; i was traveling

    to answer your question, studies (including those done by the New York
    Federal Reserve Bank) indicate that the Fed's asset purchases held down the
    10-yr yield by around 50 basis points during QE1. the current program, QE2,
    is believed to be having a more limited impact because it is roughly
    one-third the size of the original. ballpark estimate from the author of the
    original NYFed study is 15 to 20 basis points.

    so it's a factor, but not an overwhelming one.

    thanks again for taking time to write.





    ----- Original Message -----
    From: <asdasmos>
    At:  3/08  0:13:32

    Hi Mr. Lynch,

    I have a concern relating your article about the bond Market. I have
    attached a graph that you might find helpful with my question.

    *Yes, "The U.S. today is able to borrow at historically low interest
     rates", but is this not because of all the Fed purchases of US debt?

    My main concern is about the recent Fed purchases of treasuries and how
    sustainable it all is. They are now the largest holders of the debt and
    without a QE3 or QE2 continued, I am unsure how these low rates could
    continue. It then begs the questions, 'at what yield will they be
    attractive?' and 'can the US handle higher yields in terms of the economy
    and debt servicing issues?'. (This is aside from the question about the
    absorptive capacity of the world being able absorb all this debt, along
    with additional trillion dollar deficits in perpetuity.)

    *Would it be helpful to take this into account (or even mention this) when
    considering your conclusion in such an article?

    Many Thanks,


    *Article in question:

Selah's picture



I wonder what name this David Lynch posts under on ZH?


JW n FL's picture


ART! WORK!! God Love Ya! and Protect Ya! Thank You! for Sharing and being a Fantastic Human Being!

homersimpson's picture

*sigh* And people wonder why the newspapers are getting hit hard or going bankrupt...

blindfaith's picture

Homer, it is not just the papers, it all the, TV, and the net too.  All of it has become a spin sewer, and sadly I have to say the even NPR has turned into a carbon copy repeater of (we haven't done our homework either, so we will repeat the spin) station.  I just heard yesterday on NPR , that stuff shirt that hosts "talk of the Nation" that the Chinese 'and other foreign countries' buy all our bonds and "have us over a barrel".  He needs to be on Fox where you know you can get "reliable" information.

NONE of these 'stations' have the funds to PAY real investigators, not when some anchor like Kattie Curic gets 15 million for here face.  Maybe that is what Homer and family really want...a face not facts.

I stopped buying the Wall Street Journal soon after Murdock bought it...the quality became Sally has red hair, so All Sally's must have red hair,  writing.  I heard yesterday that their "Book Reviewer" just wrote that Gandi was Gay (in a new book just out)...the ass never even read the book he was reviewing or he never would have written that.  But then again, it is Rupert Murdock at this best to twist the information to fit the agenda or in-site anger.  All this is my make up your own mind.


ZEROHedge is Just about the only source for quality, real, important, and truthful information.  THANK YOU Tyler, you are keeping my ulcer well feed.

bob_dabolina's picture

Quantitative easing is not going to end.

MarketTruth's picture



#losing... dollar value
(Got physical gold and silver? You'll want to.)

Mr Anderson's picture

I'll trade you a side of beef for 5 oz of gold when SHTF. I'll even keep it frozen for you when your power goes out.

I really don't care for the gold but will trade beef for oil.


Cursive's picture


Really miss your old avatar, bro.

bob_dabolina's picture

I did too, so I changed it back however after serious consideration of using this one:

Absinthe Minded's picture

Sorry about the Junk, I was trying to open the link. I think I just did a blank post too, Goddamn Ipad and the disable rich text bullshit, I don't know where the rage for these friggin'things come from, the only reason I have one is the wife bought it for me on our anniversary. Don't have the heart to tell her I don't like it.

LostWages's picture

Yet another media company carrying the water (urine) for the administration.


umop episdn's picture

From the ZH manifesto:

"to skeptically examine and, where necessary, attack the flaccid institution that financial journalism has become."

This is yet more proof that we the want-to-know people need ZeroHedge more than ever. The truth must be known, and I am thankful for those who will teach it.

hambone's picture

You are trying to preach to the unrepetent.  They are not interested in your "facts" nor likely to convert to your "reality".

JW n FL's picture

The Bimbo's said to the CIA Guy that the Economy is up beat! Green Shoots! Bitchez!!

Not green shoots.. but green light the shoot! becuase fraud ends in FORCE!

GREEN SHOOT! coming to a Town Near You!

hambone's picture

I think Hulbert's curve is indicating we are approaching or may have already reached "PEAK BULLSHIT".

This will be quickly followed by "PEAK DEEP SHIT" catching the likewise cresting "PEAK DIP SHITS" of America by utter surprise.

Point of order though - The CNN host was correct that the economy is looking up - it is better...the real question would be at what expense?  The return on the investment of $150B monthly in deficits returning a meager 2% to 3% gamed GDP growth.  That's growth of $300 to $400B at the expense of $1.5T invested annually (plus perpetual interest payments on that debt) return in taxable income coming back to the Feds likely $100B on investment of $1.5T.  That is an investment only a governmental could call a "recovery".

We need an official ZH spokesperson to ask these ridiculous "tv personalities" some very simple questions...any nominations???

B9K9's picture

You were on the right track on your original post. Facts are merely the "ball" in which to play catch - nothing more, nothing less.

I read with bemused interest the long, long thread regarding the CNN 'interview'. Jeez louise, people, when are you going to finally give up the idea that "facts" in any way, shape or form actually frame the "debate"?

After all this time, I for some reason thought the ZH crowd was finally coming up to speed. Look, in a credit money system, there are credit & currency aggregates. One, the other or both are either expanding and/or contracting. IOW, there at most 4 possible 'states'.

The chosen who established the system by which we operate & live decide both the state & operators at any given time. There are four possible situations; so far we've been through credit expansion/contraction, and curreny expansion. That leaves a fourth option not yet played.

When you have absolutlely everything one could wish for on this temporal plane, the only remaining motivation is the avoidance of boredom. Hence, the game is simply played for the sake of entertainment. If the players have already won during the first 3 stages, which one is remaining, thus 'novel'?

This isn't difficult - the same play book has been used for thousands of years. But for some reason, they throw out a silly diversion (look, someone is pointing out it's all about oil!) and the fish take the bait, hook, line & sinker.

Hulk's picture

When you have absolutlely everything one could wish for on this temporal plane, the only remaining motivation is the avoidance of boredom. Hence, the game is simply played for the sake of entertainment. If the players have already won during the first 3 stages, which one is remaining, thus 'novel'?

There it is folks, spelled out in black and white. This is ultimately what we are dealing with. Well done B9K9...very well done...

blindfaith's picture

Neo: I suppose the most obvious question is, how can I trust you?
The Oracle: Bingo. It is a pickle. No doubt about it. The bad news is there's no way if you can really know whether I'm here to help you or not, so it's really up to you. You just have to make up you on damned mind to either accept what I'm going to tell you, or reject it.

EscapeKey's picture

Oh, but it is. How's this for STRONG JOBS GROWTH, with ENDLESS OPPORTUNITIES?

McDonald's Corp. will hold its first national hiring day April 19 to fill 50,000 openings at its restaurants nationwide. The company, based in Oak Brook, Ill., says it is making a concerted effort to add staff as its business improves and as more of its restaurants stay open 24 hours a day.

McDonald's is hiring restaurant crew and management for full-time and part-time positions. The company's hiring goal translates to between three and four new hires per restaurant.

Turnover slowed in the past few years because of the weak economy, the company says. McDonald's sees this event an opportunity to attract employees in a tough job market.

It is also trying to shed the negative connotation of employment at the fast-food chain, once dubbed "McJobs." About half of its franchisees and more than 75 percent of its managers started as store workers.

"A McJob is one with career growth and endless possibilities," the company said in a statement.

McDonald's held a similar event in its Western region last year. More than 60,000 people applied for the 13,000 positions.

Those who are interested can apply in stores or online. Some restaurants will hold events and interviews that day.

DosZap's picture

If you apply for a position, be prepared to fight 50k hispanics for a slot, and you had best be under 25.

The Paki's and Arabs, have the 7-11's.

The other chains are under Nigerian control.

More power to em' as long as their legal, at least they will work for negative wages.

 No Crackers prease.(;

Pegasus Muse's picture

Rob Arnott was on KingWorldNews last weekend.  Very insightful interview.  He spends some time explaining why GDP is a flawed metric -- it's a measure of spending, not a measure of prosperity.

James Turk's interview was superb too:

NidStyles's picture

Amazing how I had spoken to him on just that, two months ago.

Forgiven's picture

The music stopped some time ago.  Only the drunkards have not found a chair.

EscapeKey's picture

Considering Bernanke is continuously spiking the punch bowl, there's quite a few.

dearth vader's picture

The drunk don't bother for a chair, they know their Chair is always there.

camaro68ss's picture

wow Great Post! this is good for 100+ on the DOW tomorrow maybe.

bullandbearwise's picture

Folks, if Bill Gross really did dump all his Treasuries then it stands to reason he is ready to load up again. Just because he sold at one point in time doesn't mean he won't re-marry.

hack3434's picture

Your point is moot...of course he will at the right price. 

NidStyles's picture

Probably right before QE2 end's.

Gold 36000's picture

That's great if China quits buying so many treasury bonds.  I don't see how they can hold their peg if they don't recycle those dollars. 

Gosh darned if they do and gosh darned if they don't.  Those dumb chinese got us right where we want them.

EscapeKey's picture

China advice their citizens to buy gold and silver. They are quite obviously telling them to prepare for the storm.

Oh, and wasn't there some meeting about dumping the Dollar in Nanqing last w/e, done in such as fashion to take the least hit possible?

 Those dumb chinese got us right where we want them.

China have got the US, right where the US wants them? WTF?

Howard_Beale's picture

 Those dumb chinese got us right where we want them.

It was obviously a joke. A good one too.

Robslob's picture

So when no one buys treasuries then that means no one really wants dollars either...?

Double down's picture

Initially it can mean a great demand for dollars, physical ones to place in savings accounts. 

But after that, a great demand for gold

koot's picture

ZH has shown beyond a shadow of doubt proof that the Federal Government of North America is the greatest threat to the United States and for that matter all nations on the Earth.

It is time for people to first realize this and revolt against the tyranny that is the Federal Government and all its functions.  Only through nullification of this Federal Government in all things considered criminal by the States can we know peace, liberty and freedom.

Understand that these same Federal People will if they deem necessary to keep their power use nuclear weapons against the United States.

breezer1's picture

or japanese reactors????

bullandbearwise's picture

Great idea. Let's start a revolution!

Whoops, no one cares...

Mr Anderson's picture

Pretty sure the rest of the world knows how deadly our federal govt is. Considering we are killing Afgans, Iraqis, and the good people of Libya (overtly). Covertly who knows what countries we are messing with.

The world now knows there is nothing more dangerous than America.

TemporalFlashback's picture

Average Americans have yet to come to this conclusion. They let their television do the thinking.

Mr Anderson's picture

Average Americans believe we are doing the RIGHT and MORAL thing. They feel we have an obligation to police the world. To stop murders, rapists, and sovereign nations from determining their own fate.

Republicans legislate morality while democrats legislate compassion.

   The cost of Morality is War, the cost of compassion is Obamacare (which costs more in the long run, who knows.

FIAT_FixItAgainTony's picture

and the ponzi scheme attempts another extension of time....

how does that saying go?

oh yeah - same shit different day!

Ned Zeppelin's picture

But this is how three card monte is played in the street.  You watch the folks excitedly

playing the game gathered around the cardboard box, as they make damn sure that

you see where the queen card is, so you feel like you can win, they turn to you and

ask you if you want to play.  Of course you say, handing over your Andrew Jackson

entrance fee, and play you do.

This is no different.