This page has been archived and commenting is disabled.

December TIC Data: China Treasury, Agency Sell Off Continues; UK Buying Spree Relentless

Tyler Durden's picture




 

There is little that can be said about the December TIC data, as all the same (troubling) trends continue. In summary, net foreign purchases of long-term U.S. securities were $76.8 billion.
Of this, net purchases by private foreign investors were $66.3 billion,
and net purchases by foreign official institutions were $10.5 billion. The bulk of purchases was Treasurys at $54.6 billion, and $10.2 billion in corporte stocks (a fourth straight monthly decline), with token purchases of both Mortgages and Corporate bonds. Net foreign acquisition of long-term securities, taking into account adjustments, is estimated to have been $41.8 billion. Yet the most notable data continues to be the interplay between the formerly largest holder of debt (soon to be third), and that locus for bond laundering- the UK. Total Chinese holdings declined by $4 billion, as a result of $9.4 billion in Short-Term debt declines, offset by Long-Term purchases. China continues to dump agency securities like there is no tomorrow, and December is the 6th month in a row in which China has seen its agency holdings decline, but that should come as no surprise to anyone: after all they made it somewhat clear they are on the verge of liquidating the bulk of their GSE holdings recently. On the other hand, the "UK", which is either the Fed's "direct bidder" bond bonzi scheme, Chinese indirect purchases, or recycled petrodollars, just can't get enough of US debt: in December UK holdings increased by $30 billion. It has gotten so bad, that at $541 billion the "UK" is now just $350 billion away from China's total holdings ($892 billion). And Japan is now just $8 billion behind China in total US debt holdings! Of course none of this matters: The Fed will soon be more than double the next two holders (China and Japan) combined, with all the interest collected on the Fed's debt to be promptly converted to Treasury "revenues."

Breakdown of international flows by month:

Chinese holdings:

"UK" holdings:

And the only chart here that matters:

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Tue, 02/15/2011 - 11:27 | 963465 hedgeless_horseman
hedgeless_horseman's picture

in December UK holdings increased by $30 billion.

God save the Queen!

Not you, Barney, the one on the coins.

Tue, 02/15/2011 - 14:33 | 964175 BigJim
BigJim's picture

Can someone please clarify for me: when it is said that 'UK holdings increased by $30 billion', what do we mean by 'the UK'? The UK government? The Bank of England? UK banks?

Tue, 02/15/2011 - 14:44 | 964226 Quintus
Quintus's picture

Persons or organisations unknown who are buying through the City of London financial centre.  Could be anyone, but I'll eat my hat if it is any indigenous UK buyer.

Tue, 02/15/2011 - 11:32 | 963477 Shameful
Shameful's picture

The crazy continues as China backs towards the door.  Bit of a disconnect with the UK, they are undergoing austerity but can always find some money to kick to their wayward cousins :)

Tue, 02/15/2011 - 11:38 | 963497 Quintus
Quintus's picture

Nobody in the UK is buying this stuff - sufficient quantities of money simply do not exist here to do so.  It's either the Fed (directly or via intermediaries) or some sovereign that is buying USTs for reasons other than profit, e.g. for FX management purposes.

Tue, 02/15/2011 - 12:02 | 963599 gookempucky
gookempucky's picture

Totally agree-london and the fed are one in the same.

Tue, 02/15/2011 - 18:31 | 965129 Buck Johnson
Buck Johnson's picture

Your dead on, I totally agree with you and thought the same thing.  The UK doesn't have the money to keep buying tens of billions of dollars of treasuries when they have financial problems at home.  The UK is being used by the US (not so much other countries) to buy up any left over Treasuries as cover.  Its one story to have it where the US is buying 30% or 20% of bonds issued that you notice.  It's another if you see the Fed buying up 90 to 95% of the bonds issued.  They can't show that because the paid for economists couldn't defend this, they would be forced to say that it's pure monetization of the debt ie printing money ie soon to be hyperinflation. 

Tue, 02/15/2011 - 18:32 | 965133 Buck Johnson
Buck Johnson's picture

Your dead on, I totally agree with you and thought the same thing.  The UK doesn't have the money to keep buying tens of billions of dollars of treasuries when they have financial problems at home.  The UK is being used by the US (not so much other countries) to buy up any left over Treasuries as cover.  Its one story to have it where the US is buying 30% or 20% of bonds issued that you notice.  It's another if you see the Fed buying up 90 to 95% of the bonds issued.  They can't show that because the paid for economists couldn't defend this, they would be forced to say that it's pure monetization of the debt ie printing money ie soon to be hyperinflation.

Tue, 02/15/2011 - 11:37 | 963488 primefool
primefool's picture

The meta - strategy looks like
1. The Fed's holdings keep increasing as furriners reduce theirs.

2. When the Fed becomes the dominant holder - ie. bigger than all the others put together, rtes can start going up. Furriners dump even more. fed laps it all up.

3. remember - Treasuries owned by the Fed do not cost the US Govt anything in interest - it is all recycles - less Benny's $200K salary of course!

4. Thus the US can fund anything it wishes.

5. Hmm - howabout the Dollar? Well at the appropriate jucture the Euro and Yen can easily be toppled - even made to go away. They are already very sick animals - wont take much.

6. That leaves the final fly in da ointment - oil. I dont fully understand the mechanisms - but I believe between the Fed, Wall Street and the Saudis - they can basically manage the price of oil. Moreover if China and India get bogged down in steep recessions as they fight food inflation - oil demand should take a breather.

Tue, 02/15/2011 - 11:38 | 963492 Cdad
Cdad's picture

Sooooooooooo true.  Nice rendition of the crime spree that continues in America, Tyler.  Thank you.

In the meantime, capital formation, which is required for a free market economy to work, will not occur.  Hence, the Ben Bernanke banana machine is all we have left .  The banana machine, however, does NOT churn out jobs.  But it churns and churns, and the looting of US wealth continues...until it doesn't any more.  And when it doesn't anymore, we shall have reform.  And if it doesn't stop churning, then we will have revolution.

It's really simple.

Tue, 02/15/2011 - 11:41 | 963503 London Banker
London Banker's picture

As I used to comment on Brad Setser's blog on this subject, the UK buying is probably indirect buying for China and others who might perceive political risk holding directly with the Fed.  They wouldn't want their Treasuries confiscated or frozen (as US has done so often in the past) if things got ugly.  Therefore, they buy through London and hold as deposits at Euroclear and Clearstream.  Belgian, Luxembourg and US law all agree that Treasuries held in these global depositories are owned by depositors, and these depositors are subject to bank confidentiality in both jurisdictions.

Iran, Libya, etc. all hold Treasuries (it's still the most liquid asset class) through intermediaries and the global depositories too.  It's legal, and it's much safer than holding at the Fed if you think the Treasury might get mad at you someday.

Tue, 02/15/2011 - 12:27 | 963687 AnAnonymous
AnAnonymous's picture

That could be, that could be.

Wait and see though.

I wonder the worth of Luxembourg and Belgium's protection if ever the US decided to freeze or confiscate.

The US is the record breaker in terms of treaties, one more, doubtful the US is stopped by that... 

Tue, 02/15/2011 - 12:39 | 963736 SDRII
SDRII's picture

LB,

Could you comment on your viess on the irish CB print operation and ramifications if any?

 

TYIA

Tue, 02/15/2011 - 11:41 | 963506 Stuart
Stuart's picture

The data in this report is all but useless, ruined by deliberate misdirection and deceit.   Yes, you may as well call it the money laundering report. 

Tue, 02/15/2011 - 12:17 | 963652 Kayman
Kayman's picture

OK Stuart

I'll bite.  What is the misdirection and deceit ?

In some ways, "money laundering" literally and figuratively does sum it up, though.

Tue, 02/15/2011 - 13:29 | 963880 Stuart
Stuart's picture

Really?  You can actually determine with reliable accuracy, completely confident what the Chinese are doing, what the Saudis let alone what the Fed is doing from this report?  Wow.   

People who believe this report are in the same camp as those who believe the BLS data.  

This quotes from above perfectly captures my same cynicism.

"On the other hand, the "UK", which is either the Fed's "direct bidder" bond bonzi scheme, Chinese indirect purchases, or recycled petrodollars, just can't get enough of US debt: in December UK holdings increased by $30 billion. It has gotten so bad, that at $541 billion the "UK" is now just $350 billion away from China's total holdings ($892 billion)."  

Tue, 02/15/2011 - 14:43 | 964221 topcallingtroll
topcallingtroll's picture

Lots of things are hidden there, particularly china and small pissant countries that have an exchange rate "target" plus others who wish to obscure their mercantilist tendencies.

Tue, 02/15/2011 - 11:45 | 963520 Sudden Debt
Sudden Debt's picture

What I don't  understand is that they don't use their money TO DOWNPAY THEIR OWN DEBT!

 

 

Tue, 02/15/2011 - 13:52 | 963984 outamyeffinway
outamyeffinway's picture

That's the tax payers job. What, do you want to be free or something? HA!

Tue, 02/15/2011 - 12:00 | 963588 jus_lite_reading
jus_lite_reading's picture

Japan's last option is already failing. China is calling the top a bit early; they should be more concerned with the EU for now. I love how the Fed has no limit or rhyme or reason to its madness.

Tue, 02/15/2011 - 12:07 | 963619 Quinvarius
Quinvarius's picture

All for one and one for all.  Bernanke shall sing this song to all the buyers of Treasuries in the end.  http://www.youtube.com/watch?v=lLJf9qJHR3E

Tue, 02/15/2011 - 12:12 | 963634 VFR
VFR's picture

In case of fiat default the UK has been promised that when gold hits $50,000 dollars an ounce they'll get a few (ounces that is) to replace what Gordon Brown sold off in '93.

Tue, 02/15/2011 - 13:10 | 963862 mark mchugh
mark mchugh's picture

Two other things that should be raising eyebrows:

  1. "Private Pensions" now hold over half a Trillion (70 Billion in one quarter?).  Of course, which private pensions remains a closely guarded secret.
  2. My favorite group "Other Investors" holds even more than the Fed ($154B in one quarter!!!!).  Who are these masked men?

 

Tue, 02/15/2011 - 14:39 | 964201 topcallingtroll
topcallingtroll's picture

All the countries who dollar target but try to pretend they dont.

Tue, 02/15/2011 - 13:17 | 963889 proLiberty
proLiberty's picture

"And Japan is now just $8 billion behind China in total US debt holdings! "

 

All the major central banks are in collusion to commit co-inflation, where CB A swaps debt with CB B and CB B swaps with CB C and CB C swaps with CB A.   The result is that real commodties like food, oil and PMs increases in nomial terms of every fiat currency, while the prices of soft things like wages increases only much more slowly as living standards decline.

 

Tue, 02/15/2011 - 14:40 | 964208 jmc8888
jmc8888's picture

The actual value of all these bonds approaches 0. China is being smart for getting out of them.

Tue, 02/15/2011 - 20:53 | 965445 co2010
co2010's picture

MBT simulates natural conditions for your feet to walk and run farther and longer. The MBT Womens Koshi Sandals Brown do work. MBT writes unbalance for your body and feet so you have to react to receive adapted to it,read more. So,Ive been being amazed what on earth population are thinking come seal MBT shoes Chapa Coffee.From my very bodily perspective outlook, Id consider that for bulk people,MBT shoes and Masai Barefoot Technology immobile remain a high suspect tag in their heads.What what what How how how Indeed, Womens MBT Shoes VOI is a very decorative invention. Karl Mull,who is the inventor,unveiled to us the sighting that had been through stared for hundreds (if not thousands) of years. The sighting is, human feet are not arranged for even ground. For too prolonged have we been walking on bathe, flat and hard grounds. For too prolonged have we been riding horses and buses, or flying. We forgot that we are immobile what we are: vibrant being in the nature.We Womens MBT Sirima Shoe sacrificed ourselves to let go of machines. We sacrificed our feet for aesthetic reasons. We sacrificed our medicinal for convenience.

Do NOT follow this link or you will be banned from the site!