China Dumps Record $120 Billion In US Treasurys In Two Month Via Belgium

Tyler Durden's picture

Those who have been following the saga of "Belgium's" US Treasury holdings learned last month that the "mysterious buyer" behind Belgium's Euroclear was, as some speculated, China all along. Nowhere was this more evident than when showing an overlay of China and Belgium's combined TSY holdings versus China's forex reserves.

This is what we concluded last month:

  • "Belgium" is, or rather, was a front for China: either SAFE, CIC, or the PBOC itself.
  • That Belgium's holdings, after soaring as high as $381 billion a year ago, have since tumbled back to only $2532 billon as China has dumped the bulk of its Euroclear custody holdings, and that once this number is back to its historical level of around $170-$180 billion, "Belgium" will again be just Belgium.
  • China's foreign reserves tumbled and this was offset by a the biggest quarterly drop in Chinese pro-forma treasury holdings, which dropped by a record $72 billion in the month of March, and a record $113 billion for the quarter.

It wasn't precisely clear just why China, which had historically used UK-based offshore banks to transact in US paper in addition to the mainland, would pick Belgium or why it chose to hide its transactions in such a crude way, however the recent accelerated capital outflow from China manifesting in a plunge in Chinese forex reserves, coupled with a record monthly liquidation in total Chinese holdings, exposed just where China was trading.

And while we have yet to get an update from Beijing of its April forex reserves, we know that China's Treasury liquidation has continued. Enter: Belgium, only this time it is not a "mystery" buyer behind the small central European country, but a seller.

As the chart below shows, after a record $92.5 billion drop in March, "Belgium" sold another $24 billion in April, bringing the total liquidation to a whopping $116.4 billion for the months of March and April.

This means that after adding mainland China's token increase of $2 billion in April after a $37 billion increase the month before, net of Belgium's liquidation China has sold a record $77 billion in Treasurys in the most recent two months.

And while we eagerly await the monthly update of Chinese official forex reserves, we can estimate that the drop will be another $50-60 billion in the month of April.

 

The good news, for those tracking the story of China's unprecedented capital outflows, is that after "Belgium's" record March dump, in April Chinese Treasury sales slowed to the slowest pace in the past three months.

In other words, China may finally be getting its capital outflow problem under control, which, incidentally is bad news for the Chinese stock market because if true, it means the PBOC can now step back from micro-managing the stock market bubble and its "beneficial" current account inflows to offset the declining capital account.

But what is perhaps most curious is that even with China liquidating such a massive amount of US paper into a very illiquid market, the yield on the 10Y did not blow out far more in the months of March or April. And the last question: who did China sell all this paper to?

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order66's picture

Long Panda Express.

HenryHall's picture

>>> What are they buying instead?

A F R I C A

 

 

knukles's picture

Clinton Foundation Donations?

SafelyGraze's picture

don't tell anyone, but ..

they're buying american universities

 

Four chan's picture

who do the chinese say the word checkmate to over here? obama or a rothschilds functionary?

angel_of_joy's picture

...And the last question: who didChina sell all this paper to?

Well, that one is easy:

to the FED !

Ignatius's picture

Gold farted, rolled over and went back to sleep.

Aloysius Snuffleupagus's picture

$120B is over 3000 tons of gold. So to answer your question, have you looked at the price of gold lately? Is it spiking? No? Then most of the proceeds aren't being used to buy a huge amount of gold over a short period.

Took Red Pill's picture

The price of gold is not based on supply and demand anymore but rather what JPM etc. sets it at.

HenryHall's picture

The price of gold is set by the price paid by those who buy gold and stand for delivery of the metal.

Those who buy and "take delivery" in cash have no effect on the price of gold, neither up nor down.

Spitzer's picture

nope

The cash market is 100 times the size of the phys market so how could the phys be setting the price ?

Mat Cauthon's picture

The spot price of gold is a ruse.  London and Comex currently have control because dollar hegemony still reigns at the moment over commodities.  And if you look at Comex records, they haven't had an actual delivery in over two years.

No, the London/Comex Spot is used to protect metal derivatives.  That is all, and with so many short contracts out there, from which derivatives are tied to them, the 'price' is simply a manipulation to keep an implosion from occurring.

Why do you think JP Morgan gobbled up Lehman?  It was to protect the system since Lehman was the silver short engine for Comex derivative market.

Don't bother looking at the gold spot price... until Shanghai takes over price disovery in their physical markets, the curtain is still closed on the Wizard.  But once that happens, gold and silver will have no ceiling.

 

Dovie'andi se tovya sagain (It's time to toss the dice)

Got Karatbars? 

game theory's picture

China is *the* leading producer of gold. Their production numbers are manipulated quite a lot so it is hard to say just how much gold they are making.  But wherever your dart lands on their exact numbers, having the PBC stock up on gold doesn't solve their currency problem. In fact, it presents something of a problem for them. QE4 here we come.

TeethVillage88s's picture

Maybe that is why China Invaded Tibet.

I mean other than Hegemony & Conquest by China, they might have considered those mountains to contain gold.

If you expand your territory, often you expand PM Mining.

Just as the USA is able to expand oil extraction around the world. Not sure if mining asteroids is actually doable.

Kaiser Sousa's picture

"And the last question: who did China sell all this paper to?

u know who...starts with F and ends with Reserve....

can u say broke bitchez....

Seasmoke's picture

Anyone else notice things are really picking up speed. But the weekends will be my red flag. When I see the speed pick up over a weekend then I will know it's time to get ready. Still think it's collapsing in 2016. 

Grande Tetons's picture

And the last question: who did China sell all this paper to?

https://www.youtube.com/watch?v=taCfqTsFZfs

magnetosphere's picture

the right and left axes are scaled differently...

kchrisc's picture

About a year and a half ago I read a piece, can't find it on my hard drive (Clutter?), that said that China was using indirect exchange of US debt to purchase friends and assets around the world. The article said that often those bonds would be sold in Europe. It said that instead of then transferring the liquidated bonds to the FedRes, that the banksters, terrified as they should be, let them back up in Frankfurt, the City of London, and Belgium. Don't know if it's true, but the Belgium connection is interesting.

Anyways, if Europe, or Belgium is possibly starting to liquidate that horde, things seem right on track for the great dollar collapse--Don't be standing under it.

The dollar is up on "exit," not strength.

Liberty is a demand. Tyranny is submission.

rwe2late's picture

$900 billion more to go?

Flatchestynerdette's picture

Now I know why 30 year T's are pumping out higher yield rates and pushing repo's for mortgage's in high gear (month vs. month). Everyone is trying to lock in at as low a rate as possible before it goes even higher as these guys keep dumping. 

I was wondering what the push up in bps was coming from.

Haole's picture

It's over.  Welcome our new masters!

walküre's picture

They will buy back once rates go up!

MASTER OF UNIVERSE's picture

China is doing the World a favour each time it dumps US paper. We all need to do what we can to destroy the American Empire of Ponzi fraud. America is insolvent, and needs to work off their debts by doing a stint in Debtors Prison. China is America's best friend if they refrain from giving the American Gubberment more monetary heroin. It's best to just let the junkies go cold turkey IMHO. Furthermore, when the American dollar tanks our CANADIAN dollar automagically goes up every time. Thanks China!

highandwired's picture

Hate to burst your bubble but do you even understand what the CANADIAN "dollar" even is?  Have you checked what is actually backing this worthless currency that you are so proud to have? 

 

I have checked what our CANADIAN reserves actually are (reserves is what gives the currency any value).  Guess what?  It's pretty much 50/50 between the US "dollar" and the Euro. 

 

Does Canada own any Gold as reserves?  No.  Our magnanimous and wise leadership in Guberment has sold all our Gold about a decade ago at the lows. https://www.youtube.com/watch?v=5Kai5Goto2w

 

Good luck with your CANADIAN dollar.

GoldenDonuts's picture

Yes Molroneu wiped Brown's bottom.

northern vigor's picture

The Chretien government sold the gold almost btwenty years ago.

 

MASTER OF UNIVERSE's picture

I agree with your assessment that our CANUCK buck ain't backed by diddly squat, but when it comes to the American Hegemonic Ponzi scheme cartel, I enjoy twisting the knife as much as I am able. The United States of America has kept me down all of my life, and I am a vindictive motherfucker that is bound to get even come Hell, or high water. In brief, be thankful that I am not the dude with his finger on the NUKE button.

 

Go Russian Federation!!

 

Go China!!

 

FUCK America!!

 

CHC's picture
CHC (not verified) Jun 15, 2015 8:44 PM

Buy plastics damn it - it's the wave of the fucking future!

Dutch's picture

Monty Python always did hate the Belgians.

frankly scarlet's picture

If China did indeed drop this much US paper then what did she buy? China is not exchanging one form of paper for another so which hard asset did she buy? Gold and silver would be some of it and perhaps port real estate in Greece. Farm properties in southern European nations is looking attractive right now with prices depressed due to Russia's counter sanctions? Perhaps some more industrial properties in the USA?

zstard's picture

I've heard China is buying America...at a discount.

biggestbrother's picture

That is about the same amount as capital flight into real estate etc over 3 months.  So China bought itself a month and the US has even more bonds flooding the market with no volatility.

 

interesting times. Anyones guess. But most likely anyone will be on zerohedge rather than the cowed journalists over at the newspapers. 

Urtica ferox's picture

The newspapers still have journalists? I thought they'd all become stenographers.

yogibear's picture

The Federal Reserve will only panic with a currency crisis. Bank holidays, closed markets.

22winmag's picture

To the utter surprise of no one.

yogibear's picture

"The price of gold is not based on supply and demand anymore but rather what JPM etc."

Also on what the squid determines.

gatorengineer's picture

They have enormous bills to pay at home, and are closing out a winning trade... Questions?

JohninMK's picture

Russia as well

In April 2015, Russia held $66.5 billion in US government debt, down from $69.9 billion in March, and 43 percent less than the $116.4 billion it held in April 2014, when it was the twelfth largest holder of US debt. In April 2014, Russia was the 22nd largest creditor of the US.

Read more: http://sputniknews.com/business/20150616/1023419663.html#ixzz3dDt4vEru
TeethVillage88s's picture

Well looks like Doom Porn to me.

$150 Billion is chump change when the US Typically spend $1 Trillion about Tax Revenue each year.

Besides global demand for US Treasuries is well documented by the extreme buying that has been going on since 2002. Plus US TBTF Banks are projecting a big buying year.

http://www.treasury.gov/ticdata/Publish/shl2002r.pdf
http://www.treasury.gov/ticdata/Publish/shla2013r.pdf
(http://www.treasury.gov/ticdata/Publish/mfh.txt)
http://www.bea.gov/newsreleases/international/intinv/iip_glance.htm

Last Data is from January 2015.

Belgium 2002 = $10.8 B, then 2013 = $163 B, Today $354 B
Bermuda 2002 = $14 B, then 2013 = $94 B, Today ??
Cayman Islands 2002 = $10.7 B, then 2013 = $66 B, Today ??
Canada 2002 = $8.4 B, then 2013 = $46.6 B, Today $70 B
China 2002 = $95 B, then 2013 = $1,272 B, Today $1239 B
France 2002 = $11 B, then 2013 = $42.4 B, Today $75 B
Germany 2002 = $38 B, then 2013 = $54 B, Today $69 B
Hong Kong 2002 = $37 B, then 2013 = $89 B, Today $172 B
India 2002 = $5.2 B, then 2013 = $56.6 B, Today $91 B
Ireland 2002 = $6 B, then 2013 = $91 B, Today $137 B
Japan 2002 = $260 B, then 2013 = $1,023 B, Today $1238 B
Luxemburg 2002 = $20.2 B, then 2013 = $107 B, Today $176 B
Mexico 2002 = $16.7 B, then 2013 = $52.7 B, Today $85 B
Norway 2002 = $5 B, then 2013 = $74 B, Today $73 B
Philippines 2002 = $3 B, then 2013 = $36 B, Today $40 B
Poland 2002 = $7 B, then 2013 = $31 B, Today $29 B
Russia 2002 = $3 B, then 2013 = $138 B, Today $82 B
Singapore 2002 = 19.4 B, then 2013 = $82 B, Today $109 B
Switzerland 2002 = $28 B, then 2013 = $157 B, Today $205 B
Taiwan 2002 = $0 B, then 2013 = $183 B, Today $170 B
Turkey 2002 = $2 B, then 2013 = $18 B, Today $82 B
United Kingdom = $45.7 B, then 2013 = $130.6 B, Today $207 B

Obviously US Power & Hegemony has been intact for 12 years.

JohninMK's picture

It might be porn but, ignoring $1B or so changes, the only countries reducing their exposure are Russia and China.

TeethVillage88s's picture

Yes a Billion is a lot to you and me. $20 Billion can be churn for US Treasuries. But you are right that $150 could indicate a trend which requires a FED Strategy. The Damn FED has a lot of Employees and the Forms for Registering the Treasuries Held by foreigners get some assistance from the US Embassy I'm thinking. They are registered overseas.

We are talking about the Stewardship of the USD, Strength of the Petro Dollar, USD as World Reserve Currency.

So yes, we have to pay attention since the FED & TBTF & Congress won't.

I can't really prove who is selling in Belgium or who bought in Belgium. It is telling that Belgium was buying a lot. But this is Pre-NATO War Mongering, sanctions on Russia and before the EU Need for QE.