China Continues To Boycott Treasurys As Japan Prepares To Become Largest Foreign Holder Of US Paper
In all the confusion over Pandit's resignation, the monthly Treasury International Capital data came out which showed a big jump in foreign purchases of Long-Term US Assets, with the total foreign LT purchases soaring to $78.5 billion in September, the biggest inflow since January's $102.6 billion. There were inflows in all categories, with Agencies and Corporate bonds benefiting the most, to the tune of $18.6 and $10.8 billion, respectively. Purchases of LT TSYs were in line with previous months at $42.9 billion. That said, hardly anything to write home about considering the far greater inflows of prior years.
Where there were notable developments was in the composition of buyers of US paper, which showed that for yet another month, there has been virtually no buying interest in US paper by the biggest non-Fed holder: China, whose total TSY holdings were $1,154 billion, down $12 billion since the beginning of the year, and down a whopping $125 billion from a year ago. Ironically that other massively indebted country, Japan, which has Y1 quadrillion in its own public debt to deal with, for a debt/GDP ratio will above 200%, continues to load up on US paper, as the biggest paper ponzi scheme continues going ever higher and nothing possibly can get in the way. In fact, as the chart below shows, the difference between total Chinese and Japanese holdings has declined to a record low $32 billion, and will likely see Japan surpass China as the biggest holder of US paper very soon. For some reasons on why China is not buying US paper, see here.