China Liquidated A Record $83 Billion In Treasurys In July

Tyler Durden's picture

Back in May, when we first reported the "The Identity Of The Mystery "Belgian" Buyer Of US Treasurys" we made it clear that i) China was using Belgium as an offshore proxy for Treasury buying and - as of this year - selling and ii) that more selling was imminent.

Then, when we last updated this analysis on July 17, 3 weeks before the market was shocked by China's announcement, we explicitly said that "putting all of this together, it reveals that China has already dumped a record total $107 billion in US Treasurys in 2015 to offset what is now quite clear capital flight from the mainland, and the most aggressive attempt to keep the Renminbi stable."

All of this was confirmed on August 11, and over the past month when not only China devalued its currency but proceeded to dump a record amount of Foreign Reserves, some $94 billion in the month of August.

There was some question how much of these reserves was US Treasurys, and whether the liquidation via "Belgium" that we first reported in May, had continued. Moments ago, thanks to the latest TIC update, we got the answer. And boy was it a doozy.

First, we look at "Belgian" holdings which, as a reminder are not Belgian at all, but mostly Chinese, as a result of Euroclear allowing China to transact out of the European country anonymously. It is here that the massive build up started in late 2013 is now officially over, and after a another massive sale of $53 billion in US paper via Euroclear, Belgian holdings are back to just $155 billion, the lowest in over two years.

What does this mean for total Chinese holdings? Well, as disclosed mainland Chinese holdings decline by "only" $30 billion, the biggest monthly sale since December 2013.

But as we first pointed out, one has to combine Belgium and China to get the true picture.

Here is how said picture looks, when also superimposing China's total disclosed foreign reserve on the chart.

The answer: according to TIC, China, between its mainland and Euroclear holdings, sold a record $83 billion in Treasurys in the month of July. It also means that China has liquidated a whopping $184 billion notional in US Treasurys in 2015.

And since the current Belgian liquidation has brought Belgium's holdings to levels pre the Chinese buying spree, it likely means that China is all out of "Euroclear" holdings, and the residual Chinese holdings are only those held by China as of this moment, which according to TIC amounted to about $1240 billion.

Finally, and here it the punchline: the sale of ~$83 billion took place in July. This is before China announced its devaluation on August 11 and before, as we also first reported, it sold another $100 billion in Treasurys in August.

One can see why suddenly even PBOC official Jiao Jinpu said, earlier today, that the Chinese central bank sees "callenge from FX reserves drop."

Should this unprecedented pace of reserve liquidation - read Treasury dumping - continue, the Fed will have no choice but to engage QE4 in very short notice just to absorb the now confirmed record selling of US paper by China.

Source: TIC

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SuperVinci's picture

No Bush

No Crinton

Prophet of Rage's picture

Are they using the proceeds from this to keep thier stock market from collapsing further? Or are they just printing Yuan?

TeethVillage88s's picture

Your fucking high dude.

I know there must be some insiders passing this info, but it is not confirmed by the TIC Data.

Glad you never post your name on this stuff you probably deserve a good career and have good access to info.

Try Whiskey it might clear your head.

Country, Date: Jul 2015, Jun 2015, May 2015
China, Mainland, $1241, $1271, $1270
Hong Kong, $182, $181, $186

LeBalance's picture

"before the reported $100 billion sales in August."

and don't look now its September 15.

and the elite Tea Party with the Pope, etc on the East Coast of the USA ( Philadelphia, PA ) is set for September 23 - 28 timeframe.


knukles's picture

Tea Party with the Pope!
Didju people see that the White House will be greeting the Pope with a Transsexual Pro-Abortion Nun and a Gay Priest?


Maybe to return the compliment when Barry goes to the Vatican, he'll be greeted with a KKK Cross Burning and some Slavers looking for merchandise.


I mean, that's just fucking embarrassing.

stant's picture

Sounds like a joke I heard once. Dosent it start out on a airplane with one parachute or something?

CheapBastard's picture

Call me what rates revert to the norm of 7%.

Tradinglikecrazy's picture

The amount of selling will just be absorbed by the rest of the world as a result of uncertainty and the the flight to safety due to the Chinese contraction.

Yen Cross's picture

   I'll bet Kuroda is sucking all those UST from Euroclear on other end of the trade.

  Japan can't sell JGB, to raise cash. [Hell, the BoJ can't find enough JGB to monetize]So the hot potato gets tossed from China to Japan, who, by the way, has an economy about 1/5th the size of China's.

 This ends well. ha


knukles's picture

That's precisely fight, Yen.
To monetize (expand the currency base) one need not do it with domestic assets.  Any assets will do very well, thank you very much via the simple expedience of spending your own currency. 
Ding ding din, chaching chaching chaching!  Bingo!  It's the Daily Double!  I'll take QE for infinity, Alex.

lasvegaspersona's picture

Central banks and 'speculators' have purchased about $5T (each) in treasuries. These dollars could be chasing goods and services and driving the prices up. Instead they sit quietly and do not cause inflation. This is reason #1 that hyperinflation is not here already. This is the biggest storyline in monetary history and will be the undoing of the dollar if it persists. 

Central banks will behave and not sell just to hurt the system. Speculators will react because they buy to make a profit. If Yellen scares them it could be the biggest story..ever.

withglee's picture

Central banks and 'speculators' have purchased about $5T (each) in treasuries.

The treasuries have thus been "purchased" with counterfeit dollars (dollars for which there is no underlying trading promise). The US government is the counterfeiter. They pay their employees, their suppliers, their contractors, and their dependents with those counterfeit dollars.

Those dollars then circulate indistinguishable from real dollars (dollars created by traders making trading promises and getting them certified). This dilutes the value of the real dollars ... i.e. causes inflation.

We have been having increasing inflation for a long time. Our criminal government has just not been reporting it.

Besides, inflation is impossible to measure. It can only be known to be zero under a properly managed MOE process.

JJdog's picture

How many times ZH have to repeat the same news? Even my cat knows the chinese are dumping bonds. lol 

TeethVillage88s's picture

The Big story is Caribbean Banking Centers Wealth Explosion.

TIC Data is worth looking at.
Country, Date: Jul 2015, Apr 2015, Jan 2015, Sept 2014
Carib Bkg Ctrs 4/, $324.5, $295.6, $273.7, $250.6,

The Rich get Richer as everyone watch the China Circus.

Bermuda 2002 = $14 B, then 2013 = $94 B, Today ??
Cayman Islands 2002 = $10.7 B, then 2013 = $66 B, Today ??

Chuck Knoblauch's picture

It's a global exodus, and the author know it.

Another dick with a keyboard.

Luckhasit's picture

So this means the fed os going to raise rates right, right?

oak's picture

china is selling ust at top price, then using the high-valued us$ wrt other currencies to purchase high quality real assests world wide except the us ones at bottom price. very smart! they are not done yet. more selling on ust is coming as long as us$ index and ust price are high. this action is extremely profitable. they really do not care about their own stock market, which is based on cny.

china is still selling products to the world with an income approximately 40b us$/mo. the selling ust is a peanut in their reserve.

the big questions are, who are buying those ust and what china are buying.


Bangin7GramRocks's picture

And.........nothing bad happened. No hyper inflation. No skyrocketing interest rates. No stock "market" crash. Nothing. It's all controlled by the fed now. Enjoy the lunacy!

SUNKNIGHT2010's picture

That is true , however when China fully liquidates their holdings . The US economy will be facing a very dire situation . I know MANY will scream at me , shouting the USA is invincible & can withstand anything & everything
100 Quadrillion is meaningless chump change compared to full might & prosperity of the USA's economy !!!
Please remember that the Titanic was also thought invincible & eternal , well until it hit that iceberg . A very big iceberg of debt is headed our way and like the ill fated Titanic . There are VERY few lifeboats in a vast ,cold ocean !!!

Not My Real Name's picture

Ironically, I keep my "lifeboat" at the bottom of the lake.  

Sam Spade's picture

Long-term rates fell in the months of July and August, so what are we supposed to conclude about Chinese selling?  And to put this all in perspective, the Fed was buying $85 billion of US Treasuries every single month at the height of QE3.

Omega_Man's picture

defund usa cia zio now