Sorry Bloomberg, Someone DID Notice That China Is Dumping A Record Amount Of Bonds

Tyler Durden's picture

Earlier today, Bloomberg TV blasted an amusing snippet from an article that was based on some deep revelations about what is happening in the bond market:

Here is the relevant section for the highlight-challenged:

It says: "China sells $180 billion of US Treasuries but no one notices."

BBG TV references the following Bloomberg article "China Slashes U.S. Debt Stake by $180 Billion, Bonds Shrug":

China was a particularly voracious participant, boosting its holdings from less than $350 billion as its economy boomed and the nation bought dollars to keep the yuan from soaring.

 

Now, the Asian nation is stepping back as it raises money to support flagging growth and a crumbling stock market, and allows its currency to trade more freely. The latest update of Treasury data and estimates by strategists suggest that China controls $1.47 trillion of Treasuries. That includes about $200 billion held through Belgium, which Nomura Holdings Inc. says is home to Chinese custodial accounts.

All of this is quite ironic considering the following ZH headlines:

and of course:

... an article that got over 400,000 hits, half of which originated on Wall Street (you are wellcome sellside strategists).

So yes, someone noticed.

Then again, Bloomberg is also pointing out something else: the fact that all those hollow chatterboxes who have been calling for the "Great Rotation" (coughbankofamericacough) for the past 3 years have been so wrong and on so many occasions, they may well have destroyed all of their clients who listened to the call.

Bloomberg goes on to note that to "get a sense of how robust demand is for U.S. Treasuries, consider that China has reduced its holdings by about $180 billion and the market barely reacted."

Here is the irony: the market was well-aware of China's liquidation  - which goes hand in hand with China's record plunge in reserves and capital outflow, in fact when you hear "China capital outflow", thing dumping of US treasury paper. What Bloomberg however was not aware of, is that there is no market, and the only marginal buyers and sellers of bonds in what was once the world's "deepest" market, has become a centrally-planned farce (incidentally, the reason there is no liquidity is because while the Fed owns some 33% of all 10Year equivalents, the other central banks own another 10-15% - a topic we expect Bloomberg will " notice"some time in 2016).

That said, Bloomberg is correct: as China is dumping, others - mostly banks and pension funds - are scooping up what little "high quality collateral" they can find, and in fact are hoping they can trade some massively overvalued stocks to retail investors (because "buy buy buy" as we "sell sell sell") in exchange for their bonds. After all, in a world in which Fed reserves have zero collateral velocity, Trasurys have never been more valuable.  To wit, after Bloomberg finally figured out that China is massively dumping Treasurys, it adds that "other sources of demand are filling the void. Regulations designed to prevent another financial crisis have caused banks and similar firms to stockpile highly rated assets. Also, mutual funds have been scooping up government debt, flush with cash from savers who are wary of stocks and want an alternative to bank deposits that pay almost nothing. It all adds up to a market in fine fettle as the Federal Reserve moves closer to raising interest rates as soon as next month.

“China may be stepping away, but there is such a deep and broad buyer base for Treasuries, particularly when you have times of uncertainty,” Brandon Swensen, the co-head of U.S. fixed-income at RBC Global Asset Management, which oversees $35 billion, said from Minneapolis.

Bloomberg is also correct that for the time being, China's supply is being easily absorbed, and that this is not the first time China has spooked the quote-unquote market:

The Treasury market overcame turbulence sparked by China in early 2009, just as the U.S. was ramping up borrowing and as the Fed was about to expand the supply of dollars as part of its stimulus efforts. At that time, then Chinese Premier Wen Jiabao said his country was “worried” about its investment in U.S. debt and wanted assurances the value of its holdings would be protected.

 

China’s pullback from U.S. securities is “far less ominous for the prospects for the Treasury market than some sensationalists might think,” said Ian Lyngen, a government bond strategist at CRT Capital Group LLC in Stamford, Connecticut. “It’s the macro and policy stories that give you the big overall level of rates, it’s not flows.” U.S. commercial banks have increased their stakes in Treasuries and debt from federal agencies by almost $300 billion since March 2014 to over $2.1 trillion, Fed data show.

As we have also shown in recent months, despite Chinese and Japanese selling, when it comes to primary bond auctions, Indirect, or central bank interest, especially in benchmark paper has never been higher:

The category of buyers at Treasury auctions classified as indirect bidders, which include foreign investors and mutual funds, won a record 55 percent of the $1.2 trillion of notes and bonds sold this year, up from 43 percent in 2014.

But where things get most amusing is when one considers the ever changing narrative when it comes to Treasurys: after all it was Bloomberg, as well as every other mainstream media outlet, screaming there is a bubble in bonds, get out, buy stocks, and so on, because the economy is better and deflation is going away. And then what happened? The 2s30s curve crashed, and even as the short end is soaring on concerns of a transitory rate hike, the long end has plunged and is rapidly approaching a recessionary inversion. How convenient it is then for Bloomberg to U-turn its goalseeked narrative and to remind us that, actually, things are not all that good, and there wil be much demand for Chinese paper:

Unlike “China’s central bank, global investors want to buy,” said Toshifumi Sugimoto, the Tokyo-based chief investment officer at Capital Asset Management Co., which has $300 million in assets. “Investors like pension funds or life insurance companies or institutional investors, they want a higher yield with a high rating. U.S. Treasuries are very attractive now.”

But... But... Great Rotation... Economic Recovery.

That depth of demand may stand the market in good stead as the Fed moves closer to raising interest rates. “I don’t see an egregious back-up” in yields happening, said Gemma Wright-Casparius, who manages about $50 billion in Treasuries at Valley Forge, Pennsylvania-based Vanguard Group Inc. “It’s a deep liquid market, it’s a safe haven and it’s a high-yielding asset right now.”

Or, precisely what we said in the summer of 2013 "but no one noticed"...

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Headbanger's picture

Yankee dollah go home!

VinceFostersGhost's picture

 

 

Sorry Bloomberg, Someone DID Notice That China Is Dumping A Record Amount Of Bonds

 

Even worse....people are still able to buy 20oz sodas. We really need to do something about that!

Rubicon's picture

"...an article that got over 400,000 hits, half of which originated on Wall Street"

 

Cant you publish their names and company details too?

Buzz Fuzzel's picture

China and Japan are insignificant in the world of US Treasuries.  The Fed which started with nothing, produces nothing and has no authority to tax now owns $8trillion US Treasuries.  If they need to they will buy up another $8trillion and the scheme will continue until it doesn’t.

 

wholy1's picture

And that $8T is only a lesser portion of the total Treasurys being held by both American AND foreign "investors/creditors" (tongue in cheek).

Only when said "investors/creditors" are finally forced to capitualate to fact that "Treasurys" are only "worth the paper their printed on", rendering the [still] most liquid "asset" market AND the "
Fraud Preserve" DONE, will there ever be [the possibility of] any real "monetary" reality again.

JustObserving's picture

The free and fair financial press in the West is too busy pointing out how China is manipulating its stock market higher.  Perhaps, China feels gold is a better investment now.

"Why do you look at the speck of sawdust in your brother's eye and pay no attention to the plank in your own eye?

And so much for the safety of US Treasuries:

Kotlikoff contends, “If you take all the expenditures that the government is expected to make, as projected by the Congressional Budget Office (CBO), all the spending on defense, repairing the roads, paying for the Supreme Court Justices’ salaries, Social Security, Medicare, Medicaid, welfare, everything and take all those expenditures into the future . . . and compare that to all the taxes that are projected to come in, and the difference is $210 trillion.  That’s the fiscal gap.  That’s our true debt.”

Where can you get a safe investment?  Kotlikoff says forget U.S. Treasury bonds.  “I think they are one of the riskiest securities in the world because interest rates are likely to go up.  I think the Fed is going to have to keep printing money because Congress isn’t paying our bills, and that’s going to lead to inflation eventually.  So, I think long term Treasuries are extremely risky, and they can drop 5%, 10% or 20% overnight

http://usawatchdog.com/financial-system-will-collapse-just-a-matter-of-w...

philipat's picture

Remember also that Treasury's are being sucked out of the system as collateral for margins on Derivatives gone wrong. SO one set of bad bets is creating demand for, and so loss of liquidity in, another set of bad bets. The Ponzi is now complete throughout the whole "Market" Structure?

China seems to prefer Gold to Treasury's. I wonder why that might be especially in view of precisely which "Conterparties" are buying Treasury's as above??

CloseToTheEdge's picture

they gone need a bigger vacuume

505T Dollar Interest Rate Derivatives

http://www.bis.org/statistics/dt1920a.pdf

 

 

f16hoser's picture

Oh the Humanity...

brushhog's picture

Thats why I read ZH

101 years and counting's picture

bloomberg headline should have been:  "no one that is paid to not notice didnt notice".  

smacker's picture

"Which is ironic considering the following ZH headlines: ... [..]"

 

Well, obviously, the morons at Bloomberg should read Zerohedge like everybody else and find out what's "really" going on in the world.

quasi_verbatim's picture

The morons at Bloomberg probably do, but ZH is no cure for moronism. That's one reason Bloomberg trashed their own comments, to insulate themselves from actuality and to create their own reality -- an ambition of the Oligarchic Yellow Press everywhere.

But I think we may be confident that whenever Bloomberg 'notices', the Higher Authority has given its consent.

CloseToTheEdge's picture

Don't forget their blogging Minions!

Example Uno:

Yves Smith August 6, 2015 at 6:19 pm

*Sigh*

China can’t “dump” its US dollar holdings. Your scenario is like that of the sheriff in Blazing Saddles threatening to shoot himself in the head.

If China were to dump Treasuries, the US dollar would go down and the renminbi would go to the moon. China would lose its trade surplus because all of its products would become vastly more expensive to foreign buyers. That would kill a large portion of its economy, causing a big increase in unemployment and social unrest.

Moreover, dumping its Treasuries would guarantee large losses. That would also go over badly in China.

China accumulates dollars by virtue of running trade surpluses with us. It most assuredly does not want that to stop. It then decides to hold those dollars mainly as Treasuries to get a return on those holdings while not sacrificing liquidity or safety.

 

go over badly in China...PULEASE BACK ATCHA SMITH! your Hedge Fund is going down to Zerio with the rest of them. stick that in your cuite critters mouths...

CloseToTheEdge's picture

and today we witness example dos:

 

Yves trashes her own comments (only on particular copy/paste yak)

http://www.nakedcapitalism.com/2015/08/wolf-richter-chinas-hard-landing-...

 

No Comments Allowed?  what's the problem...walls closing in on the tiny room Susan built??

PleasedToMeatYou's picture

"China sells $180 billion of US Treasuries but no one notices." 

So really all that happened here is Bloomberg defined who belongs to the group "Nobody". 

..."It's a big club, and you ain't in it." 

smacker's picture

 Nobody is the most popular candidate ever...

MFL8240's picture

 

Unlike “China’s central bank, global investors want to buy,” said Toshifumi Sugimoto, the Tokyo-based chief investment officer at Capital Asset Management Co., which has $300 million in assets. “Investors like pension funds or life insurance companies or institutional investors, they want a higher yield with a high rating. U.S. Treasuries are very attractive now.”

 

This is insulting!!

buzzsaw99's picture

When you hold $1.5T nobody notices a measly $180B. thanx bernank.

VinceFostersGhost's picture

 

 

Congress put me and my kin on the hook for over 200T in derivatives.....I'm noticing it like a bitch.

Obamamerica's picture

What happens when the curtains are pulled back and China shows it has no T-bills, but 15K tons of gold and is establishing a new gold-backed reserve currency?

Will the US try to invade and blame it on some false flag cyber attack?

Boxed Merlot's picture

15K tons of gold and is establishing a new gold-backed reserve currency?...

 

I would think it would only matter if they would allow their gold backed currency to be traded for their gold that's backing it and for it, (the gold), to be traded directly wherever the owner wished, and without tracking.

The USA has enjoyed the halo effect since 1964 and later 1971 when a somewhat legitimate PM coinage/exchange was still present in legal tender trade and non-trackable.  It will be ever more difficult to recapture that element of value in trading, i.e. anonymity, as long as the front currency is serial numbered and/or electronically monitored.

By the way, why has the Congress of the USA allowed a private sector entity the power to control something as vitally important to the safety, security and well-being of the nation as setting interest rates on public sector debt?

Anybody else find it amusing that the term “won” is used by those successfully obtaining interest bearing USTs?

Jmo.

LawsofPhysics's picture

LOL!!!  At this point, what difference does it make?

What part of ALL paper promises will go to fucking zero don't you morons understand?

shovelhead's picture

You should add to your astute observations that our sun will also go supernova ...

Eventually.

LouRukeyser's picture

Actually our sun will become a white dwarf eventually, but...

NOZZLE's picture

A headline as credible as Unarmed Black Teen Shot, or, MegVagyyyn Kelly Has Credibility 

El Hosel's picture

Headline this...... " Buffet Buys the Top" .  Warren spends 32 Billion of other peoples money on his 85 th Birthday. Its a big club.

oak's picture

more interestingly, who are buying those bonds and how?

Peter Pan's picture

Everything has become  circle jerk. Some German think tank recently came up with the conclusion that the Greek crisis actually helped Germany balance its budget by forcing interest rates down by 300 basis points which in turn meant that the savings to the budget exceeded the costs of helping out Greece.

You can't make this shit up even if you are on drugs. As the article said yesterday.....a fix and not a solution.

rsnoble's picture

The psychopaths are in full control.  Look at the booming market this am, they are trying to come up with the next big story to push this overpriced garbage even higher.  Perhaps nukes dropped on Russia would do the trick?  Hard telling anymore.

rsnoble's picture

Who the fk could even afford to buy $180 billion in US trash? Mystery buyer my ass lol.  The Fed's digital zero machine at it again.  Imagine the power you'd have if you could create currency out of thin air in any quantity you want without having to ask permission.  This system is severly fucked.

Peter Pan's picture

Even North Korea which makes superb counterfeit US currency wouldn't be seen dead buying US bonds so what's the matter with the rest of the world?

thunderchief's picture

This current crisis may be China's last chance to dump their US T's for hard assets.

The USA will by then be force feeding Treasuries into IR A'S and 401 K's. 

Montani Semper Liberi's picture

Thank you Tylers for having pretty boy Chaz in the screenshot. Made my day Wen I saw that. Gives new meaning to the old advertisment slogan 'Gonna Wash That Man Right Outta My Hair!'

Montani Semper Liberi's picture

 I was wrong. Should google my childhood memories to make sure they're accurate.

 The line is the title to a song in the movie South Pacific, and said song was reused later in a shampoo advertising jingle with the word man changed to grey.

SlipStitchPass's picture

Who gives a Fuck about China....someone save us from Chaz Dean.

laomei's picture

everytime a client pays me, it's in USD, and that gets swapped for RMB rather quickly.  what is this then?  My client valued my services more than USD and amply got rid of them.  I valued RMB more than USD and got rid of them.  And now China, who has long since been the sink for them, is starting to want to get rid of them.... and so are other sinks.  Gonna get interesting.

Omega_Man's picture

USA - Greece - same difference

Obamamerica's picture

Greece aborts minority babies and sells their organs for profit too?

SMC's picture

"deep and broad buyer base", "deep liquid market", "safe haven", "high-yielding asset"...

Perhaps one man's trash is another's treasure!  ROFL.

 

Herdee's picture

Unlimited margin makes up the difference for Government Securities.There's as much liquidity as they can provide,unlike other securities like stocks.When the stock market corrects,the money will flow into Treasuries,leaving the average guy and gal as the sucker at the top.

Obamamerica's picture

How long will it take the FED to finish buying all the worthless T-bills China is dumping for Gold?

Consuelo's picture

 

When the rhetoric begins to escalate again between China and the U.S. (take your pick; 'currency manipulator', 'hackers', 'bullying their neighbors', etc.), you'll know something $$$ important is taking place.   If it actually starts moving towards potential conflict, you'll know that China is/has/about to do something in the $$$ space that is potentially 'life-threatening' to the U.S.   Doesn't have to be 'dumping Treasuries' either.   Could involve gold.   After all, China divorcing the $U.S. doesn't have to be an 'act of war', such as dumping Treasuries en masse would be seen.    The U.S. would/will have a difficult Public Relations scenario on their hands if they attempted a regional conflict in a sovereign nation's backyard, simply over China revealing it's (true) physical gold holdings. 

Bitcoin Meiser's picture

Everyone reads this blog but the mainstream news outlets won't give it credit for it's findings.

Consuelo's picture

++

 

- They're owned

- Truth is too scary

- Playing in fantasy land is more fun

- Keeps $$ flowing in the 'right directions'

smacker's picture

Eggsactly.

If MSM were to admit ZH it would be another nail in its own coffin.

mendigo's picture

Eat 'em up.

We'll make more.

joego1's picture

All those treasuries went into the magic black box and with a tap tap tap of the magic wand "presto chango" and they are gone.....

Inbetween is pain's picture

ZH, here's a reason no one of importance is reading you: between the real news, you're filled with tabloid news and conspiracy theories. There is so much bullshit on this website that I always have to ask myself, Is it true or did the writer just make this up?