China Sold Second-Largest Amount Ever Of US Treasurys In December: And Guess Who Comes To The Rescue

Tyler Durden's picture




 

While we will have more to say about the disastrous December TIC data shortly, which was released early today, and which showed a dramatic plunge in foreign purchases of US securities in December - the month when the S&P soared to all time highs and when everyone was panicking about the 3% barrier in the 10 Year being breached and resulting in a selloff in Tsy paper - one thing stands out. The chart below shows holdings of Chinese Treasurys (pending revision of course, as the Treasury department is quite fond of ajdusting this data series with annual regularity): in a nutshell, Chinese Treasury holdings plunged by the most in two years, after China offloaded some $48 billion in paper, bringing its total to only $1268.9 billion, down from $1316.7 billion, and back to a level last seen in March 2013! 

 

This was the second largest dump by China in history with the sole exception of December 2011.

 

That this happened at a time when Chinese FX reserves soared to all time highs, and when China had gobs of spare cash lying around and not investing in US paper should be quite troubling to anyone who follows the nuanced game theory between the US and its largest external creditor, and the signals China sends to the world when it comes to its confidence in the US.

Yet what was truly surprising is that despite the plunge in Chinese holdings, and Japanese holdings which also dropped by $4 billion in December, is that total foreign holdings of US Treasurys increased in December, from $5716.9 billion to 5794.9 billion.

Why? Because of this country. Guess which one it is without looking at legend.

 

That's right: at a time when America's two largest foreign creditors, China and Japan, went on a buyers strike, the entity that came to the US rescue was Belgium, which as most know is simply another name for... Europe: the continent that has just a modest amount of its own excess debt to worry about. One wonders what favors were (and are) being exchanged behind the scenes in order to preserve the semblance that "all is well"?

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Tue, 02/18/2014 - 11:44 | 4448106 Duc888
Duc888's picture

 

 

 

 

"I didn't vote for that level of insanity.."

 

Actually, if you vote at all you consent to the rape in progress.

Political party A : Anally raped

Political party B: Orally raped.

Tue, 02/18/2014 - 11:52 | 4448144 GVB
GVB's picture

Agree. But I told you I didn't vote

Tue, 02/18/2014 - 11:52 | 4448146 laomei
laomei's picture

Voting conveys a claim to legitimacy.  Stop clapping and tinkerbell will fade away and die.

Tue, 02/18/2014 - 11:46 | 4448111 FieldingMellish
FieldingMellish's picture

<-- Mayo with your freedom fries.

<-- I'll buy your worthless paper if you buy mine. 

Tue, 02/18/2014 - 11:47 | 4448121 Burticus
Burticus's picture

Ah so!  Sum ting wong.  Wei too lo.  Ho lee fuk.

Tue, 02/18/2014 - 11:48 | 4448128 starman
starman's picture

90% of the bank's are insolvent! They've been extenting on bad loans , then repackaging them  for another grade D investment !  The world is in debt of megalithic proportion s!

 

 

Tue, 02/18/2014 - 11:49 | 4448131 Seasmoke
Seasmoke's picture

Eat you peas. Just make sure you leave one, so the shell game to continue. 

Tue, 02/18/2014 - 11:55 | 4448162 Dr. Engali
Dr. Engali's picture

Round and round she goes.... where is the debt bomb?  Nobody knows.

Tue, 02/18/2014 - 13:17 | 4448581 forwardho
forwardho's picture

While we were asleep at the swich, minding our own lives, the debt bomb was slipped like a noose around our necks.

Take heart, death will be nearly instantanious.

Rock on Doc.

Tue, 02/18/2014 - 11:58 | 4448174 wagthetails
wagthetails's picture

so the Fed is buying $60bn but the Chinese are selling $48bn.  I believe China just dropped a check mate.  If the Chinese increse sales, then the fed will have to increase buying to offset interest rate increases.  But all this does is allow China to sell all their Treasuries at high prices.   Or, the Fed continues to Taper and interest rates start to singificantly rise.

keep low rates and bail out china, or let rate rise and harm the economy.  bang up job guys. 

Tue, 02/18/2014 - 12:00 | 4448182 fonzannoon
fonzannoon's picture

The fed is tapering because the rest of the world, in aggregate, can't get enough UST's for themselves. That's all that happened here.

Tue, 02/18/2014 - 12:59 | 4448499 RSloane
RSloane's picture

Pretty much, yes.

Tue, 02/18/2014 - 13:42 | 4448723 Unprepared
Unprepared's picture

.. and can I posit this has less to do with coordinating to shore up treasuries market and more to do with demand for high-quality* repo'able/collaterable assets... just ask Basel

*don't shoot the messenger

Tue, 02/18/2014 - 15:42 | 4449271 fuu
fuu's picture

Starting today the Reverse Repo facility will increase rate to 4 basis points from 3.

Who are those counterparties again? http://www.newyorkfed.org/markets/expanded_counterparties.html

Tue, 02/18/2014 - 12:04 | 4448198 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

Keep your eyes on Japan and the ECB. The game keeps up until the printing press of last resort aka the FED has no other presses to outsource the job to.

WWIII commences once the Federal Government can't service debt and will default unless they give up power and control.

Power and control doesn't relinquish itself without a violent outburst in it's last gasps for life.

Tue, 02/18/2014 - 12:36 | 4448364 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

Disolution of the Euro if not the whole EU is probably going to be the trigger of the real collapse when all is said and done. What black swan event causes it, I don't know but if I was a betting man I'd put my chips on one of the former Iron Curtain states now part of EU/Nato as being a likely culprit that starts the chain reaction.

Tue, 02/18/2014 - 13:57 | 4448785 ghostzapper
ghostzapper's picture

Certainly a logical way to look at this which is why one might consider abandoning that viewpoint.  The Fed is SAYING that they are tapering.  We have absolutely no idea if this is true in a literal sense.  They jawbone taper and jerk each other off (Yellen goes first of course) with CNBChitchatters and talk about how "everything is fine" and they can draw down QE.  Yet, behind the scenes lord only knows how many new scams are put into motion each month or quarter.  Globally the printfest is increasing and not decreasing.

gold/BTC/silver

Tue, 02/18/2014 - 14:26 | 4448928 SDShack
SDShack's picture

The entire bond market is distorted with the Fed only controling 1/3 of it. Imagine what will happen when the Fed, controls 51%. Bond Vigilantes neutralized, ZIRP forever, no threat of debt service collapse - Game over. That's their plan. Actually, this China sells, Belgium buys article proves it. The Fed, through their CB proxies around the world, already controls the bond market. Wake up. It's all just a paper shuffle to keep the flow going. All ponzis are dependent on flow. But when the Fed controls the printing press AND the bond market, the ponzi is self perpetuating. This will only collapse by revolution from the people, and the people are sheeple. This isn't going anywhere for years.

Tue, 02/18/2014 - 12:01 | 4448184 Iambic PentaMaster
Iambic PentaMaster's picture

Nothing to see here, low-information types.

Move on and continue to ignore at your own peril.

Tue, 02/18/2014 - 12:02 | 4448194 shankster
shankster's picture

How do you say 'we own you USA' in Chinese?

Tue, 02/18/2014 - 12:10 | 4448233 fuu
fuu's picture

Cha-ching?

Tue, 02/18/2014 - 12:56 | 4448481 Chuck Knoblauch
Chuck Knoblauch's picture

Sum Ting Wong

Ho Lee Fuk

Tue, 02/18/2014 - 12:09 | 4448223 q99x2
q99x2's picture

No favors needed. The US, London and EU banksters are one Except for the physical location all national budgets are one. My FAFSA comes from Belgium and our taxes are paid to the Europe.

Our elected officials have committed treason.

Tue, 02/18/2014 - 12:15 | 4448251 csmith
csmith's picture

Don't forget Kansas City...greatest SNL skit ever...

http://snltranscripts.jt.org/76/76mappeal.phtml

 

Tue, 02/18/2014 - 12:25 | 4448304 Fix-ItSilly
Fix-ItSilly's picture

What's the big deal? If China wants to diversify from their USD$ holdings, and procure some Euro exposure, wouldn't this be a natural trade that does not expose the ECB to yuan?

Tue, 02/18/2014 - 12:27 | 4448314 Volaille de Bresse
Volaille de Bresse's picture

"One wonders what favors were (and are) being exchanged behind the scenes in order to preserve the semblance that "all is well"?"

 

It's not favors it's sexual blackmail : the whole EU staff is held on a leash with some sex scandals involving minors. Google "Regina Louf" to unveil a part of the story.

Tue, 02/18/2014 - 19:51 | 4448461 Chuck Knoblauch
Chuck Knoblauch's picture

Looks like two old whores giving each other oral relief.

US promises EU no oil shortages due to Ukraine destabilization.

EU purchase UST and seals the deal. Short-term thinking as usual.

XXX000! LOL!!!!!!!!!!!!!!!!!!!!!!

LOONEY TUNES!

Tue, 02/18/2014 - 19:50 | 4448627 Chuck Knoblauch
Chuck Knoblauch's picture

Award for best blackmailer across all genres in media goes to the United States of America!!!!!

Accepting the award for the USA will be the new Israeli troll chairing the FED Kabbalah, Janet "the non-gentile" Yellen!

CLAP!   CLAP!   CLAP!

Tue, 02/18/2014 - 17:02 | 4449641 PhilofOz
PhilofOz's picture

I've often thought this must be the case with half the US Senators and Congressmen the way they grovel up to Israel. 

Tue, 02/18/2014 - 12:39 | 4448382 the not so migh...
the not so mighty maximiza's picture

It is good to know Belgium will buy all of it when China dumps all of it. 

Tue, 02/18/2014 - 12:50 | 4448451 Chuck Knoblauch
Chuck Knoblauch's picture

Is it a trend? January?

Tue, 02/18/2014 - 12:45 | 4448424 elwind45
elwind45's picture

The fed is buying its own debt? The fed is buying treasury debt with income freely available from productive carbon based lifeforms. The idea that it is buying its own debt is simplistic. The income it generates by throwing good money after bad is the reason everything is good and not bad? In the future as EM currencies collapse and real rates collapse you will find comfort in treasuries at the expense of your way over valued stacks of ancient PM?

Tue, 02/18/2014 - 12:48 | 4448433 Peter Pan
Peter Pan's picture

Termites eat what they can but when the structure is about to come down, they hold hands for dear life.

Tue, 02/18/2014 - 12:47 | 4448435 Chuck Knoblauch
Chuck Knoblauch's picture

US & NATO vs. Russia & China tag-team wrestling.

Tue, 02/18/2014 - 12:51 | 4448454 Peter Pan
Peter Pan's picture

Tot for tat or perhaps a warning shot. Or perhaps a sign forthe rest of us that we are getting clser to the drain hole.

Tue, 02/18/2014 - 13:30 | 4448652 Chuck Knoblauch
Chuck Knoblauch's picture

The main event cannot hide behind the preliminary PROXY matches for much longer.

I hate opening acts! Burn the Christians already! I want the GLADIATORS!

Tue, 02/18/2014 - 12:50 | 4448452 MFLTucson
MFLTucson's picture

The fraud never ends with this trash in the Federal Reserve and these auctions.

Tue, 02/18/2014 - 12:55 | 4448459 Fred123
Fred123's picture

China needs the money to prop up their banking sector which is on the verge of collapse. So instead of the USD collapsing we may see the Chinese Yuan take a huge dump. This may be an event that is talked about for centuries.....lol.

You want to see a real panic? Wait until a Chinaman thinks his money is gonna be stolen by a bank......these people will go insane.....

Tue, 02/18/2014 - 13:00 | 4448504 Mark123
Mark123's picture

Bingo!  And guess who they will blame?

The west.

Tue, 02/18/2014 - 13:49 | 4448757 Chuck Knoblauch
Chuck Knoblauch's picture

JP Morgan is acting like a NGO in China. Hire the Chinese and hope their greed and laziness will keep them in check.

 

I wouldn't call that a very good strategy. Promise China the world and they may want to collect.

 

Sounds treasonous to offer China my won tons.

 

 

Tue, 02/18/2014 - 12:55 | 4448465 aardvarkk
aardvarkk's picture

I wonder how much of Europe's sudden willingness to hold US paper is related to the new MyRA announcement, and to the suspicion (or knowledge) that it will be foisted on lots of people whether they want it or not?

Tue, 02/18/2014 - 12:54 | 4448466 giorgioorwell
giorgioorwell's picture

Yawn, Selling 3% of their holding is hardly headline worthy ZH.  Wake me when it's 10% or more

Tue, 02/18/2014 - 12:55 | 4448473 BrigstockBoy
BrigstockBoy's picture

Fuck the EU, right?

Tue, 02/18/2014 - 12:56 | 4448477 Mitch Comestein
Mitch Comestein's picture

That probably marks the intermediate bottom!!!

Tue, 02/18/2014 - 12:57 | 4448491 elwind45
elwind45's picture

Once governments decide that throwing money at a problem isn't working they soon run out of ideas except "let the free market decide"! Without intervening by applying more capital the free market is left to be free to market valuables? As the price of valuables collapse more are offered at lower prices and the past excess liquidity is absorbed. Money being free of the rock adds instant inflation which at this point is badly needed. Money liberated from the rock reinflates the world!

Tue, 02/18/2014 - 12:58 | 4448495 Mark123
Mark123's picture

There is only one central bank in the world....USA, Europe, Japan are just regional offices.  Big bankers have always had one goal...enslave the people so you can control the game.  I think they are doing a swell job for themselves.

My only interest is what will happen when they call the loans to China.  From what I see, the ruling class in China has been bought off and is merrily living the good life around the world buying the fanciest, most expensive trinkets available.  When the bankers pull the plug on that game it will get ever so interesting....

 

Tue, 02/18/2014 - 12:58 | 4448497 kchrisc
kchrisc's picture

I guess we know why it got a bit quiet over those new territory demands by China.

The Golden Rule: Those with the gold make the rules. Those that need to beg are dead.

Tue, 02/18/2014 - 13:39 | 4448706 Chuck Knoblauch
Chuck Knoblauch's picture

Obozo is too busy posing for a selfie in Michael's, I mean Michelle's $12,000 dress.

Tue, 02/18/2014 - 13:48 | 4448751 1835jackson
1835jackson's picture

Out there in the vast ignorance of the world it festers and spreads. A shadow that grows in the dark. A sleepless malice as black as the on coming wall of night. So it ever was, so will it always be. IN TIME ALL FOUL THINGS COME FORTH.

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