Foreign Holdings Of US Treasuries Surge Driven By Record "UK" Purchases
August saw the second largest purchase of US Treasurys by foreigners in history, which at $117.1 billion was just slightly smaller to November 2009's $117.9 billion. However, unlike then, in August there was an inflow into every single category of US security, with inflows of $4.6 billion in Agencies, $10 billion in Corporate Bonds, and $4.8 billion in Corporate Stocks. The generic data is there: Chinese and Japanese holdings both increased, the former by $21.7 billion to $868.4, the latter by $15.6 billion to $836.6 billion. Which means that the Fed has once again relinquished second place in total UST holdings to Japan...but only so for a few days. At about $825 billion, and with 8 POMO coming up in the next 3 weeks, Japan will be left in the dust shortly. Unfortunately, the historic event of overtaking China as the world's largest holder of Treasuries by the Fed will have to be delayed until late November. Yet there was something very troubling about August's TIC data: the primary driver for the explosion in total foreign holdings from $4.066 trillion to $4.213 trillion, an increase of $147 billion, was the literal explosion in "UK" holdings of $74 billion from $374BN to $448BN. (we put it in parentheses because the purchasing is certainly not being done by the UK government which itself is planning on starting it next round of QE, or monetizing its own debt, imminently). What the true source of this purchasing power and interest is, only the Federal Reserve truly knows.
Some other curious tidbits: Luxembourg holdings of USTs dropped by $19.8 billion in the month, however only to see the increase in Belgium holdings by $17.7 billion, a doubling of its previous total of $16.6 billion to $34.4 billion. And Germany, at $58.7 billion, now owns less US Treasurys than Thailand ($60.9 billion).
Total monthly change:
Looking at the big boys, here are the flows in Japanese Treasury holdings:
Total Chinese holdings: an increase of $22 billion in August.
Yet here is what should be making news: UK (aka Direct Bidder) holdings. These are self-explanatory. As a reminder, a failed auction means game over.
Total UK flows:
And total holdings.