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China Dumps $100+ Billion In USTs In December Per Revised TIC Data; UK Is Now Russia's Shadow Buyer
Every year in February, the Treasury department releases its adjustment to foreign purchases of Treasury bond holdings as of the previous June (with revised and overriding estimates for all the intervening months in the interim, as well as previous monthly forecasts). It did that earlier today. And while many may have been expecting the revision to show that contrary to Zero Hedge claims China has in fact been building up its Treasury stake (following the now traditional transfer of UK purchases to China), the reality is that not only has China indeed been dumping US exposure (first reported by us previously when we observed the plunge in holdings in the Fed's custodial account), selling over $100 billion in Treasurys in December alone (bringing its total to $1152 billion, and down 12% from its June total of $1307 billion) but that probably far more curiously, the UK is no longer a shadow buyer of Chinese bond accumulation and instead has become a secret accumulator of Russian holdings.
First, here is a link to the revised TIC data as of this afternoon. That lack of Chinese trade surplus is really starting to bite not only China, but also the US, which as we noted last time, will be forced to rely ever more on domestically funded purchases of USTs: read Primary Dealers and the Fed, as the rest of the world developing world, also known as US Treasury buyers, clams down and exports far less to a recessionary Europe and contracting America. As the chart below shows, Chinese holdings are sliding, no matter how one cuts the data.
So compared to the pre-revision Chinese holdings number, which was $1101 billion, China is still accumulating bonds, right? Well, not really, because on one hand a decline is a decline even relative to a different benchmark. But more importanly, most had assumed that the UK's pre-revision number of $414.8 billion in Treasury holdings would be allocated almost entirely to China. As it turns out it wasn't.
In fact of the post-revision UK holdings of $112.4 billion, at best $50 billion, or 17% was allocated to China. Where did the rest go? Well, of the top holders, $40bn went to Japan, $25 billion went to the Oil Exporting countries, $20 billion went to Brazil (which is becoming an increasingly dominant buyer of US paper), while Carribean Banking Centers (aka hedge funds) saw about $50 billion allocated to them.
Yet the biggest surprise, is that contrary to previous speculation, Russia has not been dumping its Treasurys. In fact the country's holding of $150 billion are the same as they were back in June, and over $60 billion more compared to the pre-revised number.
In other words the biggest beneficiary of stealthy UK accumulation is no longer China (which is not accumulating US paper at all and quite the contrary), but Russia.
Russian holdings pre-revision:
and post:
Then again, this is the TIC data, which is notoriously wrong all the time. Best advice: keep a track of that Chinese trade surplus. If it becomes a deficit (just like Japan did recently), that is the first signal that things are changing dramatically from an international flow of funds perspective. It also means that unless the US finds subtitute demand, most likely from within, the only remaining buyer will be the entity that already has the largest holding of US paper - the Federal Reserve.
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DUMP, Bitchez!
pattern recognition par excellence there Maxmad
Gold in, US Treasuries/Trash out ..by gum, i think China gets it
Yep China gets it, just scratching my head on Russia! "Putin" is up to something
Continued Chinese liquidation of treasurys is to be expected, consistent with the performance of the Chinese economy.
Not really... China's still doing absolutely fine. What you are seeing is China diversifying assets and moving towards a delinking with the US before it's too late. When the dust settles, you'll be seeing a world very much controlled by Chinese interests.
Hahaha!
Its been a while since the "china is taking over the world crowd" has come out to play.
I am old enough to remember the same thing being said about another asian nation in the early 80's.
Good luck usa haters. Japan delinked during the plaza accord. They died.
I so wish china would delink. We can compete with anyone who doesnt attempt to artificially suppress their currency
Correct Hugo - China wants nothing more than to control the Orient. That's all they've ever wanted. If trading with "the West" helps them achieve that goal, then they'll do it, but they're interests are their half of the Pacific, and as far West as the Himalayas
Japan was stupid and listened to US demands. Generally, any country who listened to US advice got smacked hard in '97. China didn't.
What you'll be seeing from China is dumping the low grade crap that importers demand onto lesser economies while focusing on high-value commodities. By controlling the material inputs, China will still get a piece of the action on the lessers while moving in on the high-values. This ain't Japan.... it's an entirely different setup.
If China is moving into a consolidation phase, I think that's a pretty good indicator that they don't see the economy expanding much in the future - meaning, they won't be there to save the US when it's economy collapses because, afterall, why would they? The US won't be able to buy their exports anymore...
LOL- China doesn't have the faintest idea what a "high-value commodity" is- garbage in, garbage out, all across their board.
China still deludes themselves that they're anything more than a low-grade player- they've been lagging behind in that regard for 400 yrs.......
"Japan was stupid and listened to US demands."
Exactly, Japan's inflection point was actually in 1985 with the plaza accord. It was all down hill for them after that.
Speaking of our Nipponese friends..
Don't they have to raise a few yen in March?
If the US manages to get the country back, then we're golden.
If not... I'm outta here. G' luck t' y'all. Enjoy the scraps of empire.
So now we have information that China, our largetest creditor, was a net seller of treasuries in 2H2011, and yet the 10Y rallied, falling from ~3% last summer to end the year at 1.88%. And that was even though a HISTORIC downgrade!
This is actually fantastic news! As China slowly exchanges our debt for hard assets (which everyone expects), there still remains an insatiable demand for our treasuries. Whatever China isn't buying, Japan and our own bank is. Perhaps the US is not as dependent on China as everyone thinks. I'd rather owe Japan or ourselves (the Fed) at <2% than China at 3%+.
In fact, the more I think about this, this might be the most bullish article ever posted on ZeroHedge.
Max Fischer, Civis Mundi
Max - The Fed, conjuring new script to buy more bloated US Gov debt is bullish in what way exactly? Whatever China does, the fate of our ponzi is known.
So Benny prints dollars out of thin air...then uses these newly printed dollars to buy US tres bonds...which goes to pay for the government's spending. Wow...and Houdini was called the greatest magician.
The Fed isn't doing that at least on record so who really is buying this paper? I could understand it when everyone said Europe was dead but they act as if it's fixed now so where are the buyers of this astounding amount of paper? Who is buying so they can have the honor of losing money to inflation, even at the bogus inflation levels?
Bennybucks bitchez!
Hi Old beautiful (it is your name right?) , China will have a transition period, but overall China will do fine if it pushes hard on Thorium energy (China is the leader on that). The West has been in trade deficit between 16th century and 1820 (until Silver from Mexico unreliable coinage created problems + opium wars from brits and french on second war, my apologies for that as a french man, that is the only way the West found tobalance trade and finally demonetization of Silver hurtChina). I think China would do well not to do British and American mistakes (demonetization of Silver and rigged price of Gold for the Brits under Gold standa4d). The French favored neutral money that is bimettallism (which implies competition between forms of money), empire money (Gold mono metal standard and the following ones until the current USD fiat system) lead always to wars and systemic unemployment in the long run for the country using it. If you lead, lead well, use the no seignoriage money for foreign trade like the Chinese emperor money did (Silver standard using Mexican coins), avoid doing our mistakes of empire money, Gengis Khan empire fiat led to diaster for China (flying paper disaster), roman empire money denarius ended completly debasee. This new system could be done with HKD (it is a non fiat paper curency with no central bank, ergo noseignoriage since no printing). HKD would be pegged to multiple foreign currencies baesd on trade with adjustement managed by HKMA and each of central banks of countries actually trading worldwide. No country would be able to collect segniorage outside of its country, it would be fair, the HKD would reflect trade flows in aggregate, it would be stable. It would not lead to wars.
It kinda brings back to the forefront the massive 15 trillion dollar transfer that a MP of england brought up a few weeks ago in the UK. Maybe the debt that is being bought by undisclosed buyers oversees is actually the US using the UK and other UK territories as cover. So in effect most of the US treasuries are being sold to the US and being bought to the US. This game is going to end very very badly, trust me.
They are buying Apple
not much else in America worth much
GE, GM, USD ..you're avin a larf
Apple's current MC means each employee is worth $833,000
peanuts.....Silver Wheaton ...each employee is worth 17.6 million
who shall be the one without a date when the music stops?
Bubble Ben
...still blowing bubbles to the grim end
More Chinese liquidation. What a surprise.
Petrodollar being squeezed out of Eurasia.
http://azizonomics.com/2012/02/28/iran-squeezes-the-petrodollar/
A 10% reduction Treasuries isn't a liquidation
10% IN ONE MONTH ISN'T A LIQUIDATION?
Zerohedge in the news!!!! China dumping everything AMERIKKAN!!!
http://www.youtube.com/watch?feature=player_profilepage&v=cJg99tGolNI
THAT was Kewl!
On the postitive side, bond purchases will increase with PIMCO's activly managed bond ETF, which will allow foreingers to activly buy USTs. While private purchases of bonds will not make up for selling by soverigns, it will lessen the blow.
Been saying this for a long time... China dan dump that crap anytime it wants to and has been by buying up resources and assets that actually are worth a damn and paying for them with USTs.
Which of course begs the question, what has China been buying up? :)
I don't think you know what "begs the question" means.
Well you are terrible investors. Gold? No, more likely chasing yield, say Europe again only to be brutalised (again) once Europe reveals how burned they are with inflation = bonds going down the toilet.
Go nuke the ECB, they set up the biggest con on Euro bonds since Hitler's Operation Bernard https://en.wikipedia.org/wiki/Operation_Bernhard
Treasury bond interest rates go UP, "budding" housing recovery goes BOOM, job market in US remains in eternal dirt nap.
Oh, and I can think of a few other things that will go BOOM, too.
Wanna guess?
a). Bummas election hopes b). California, New York and Detroit c). X-Factor 2013
Do you really think Mitt can defeat Obama? Wish it were so but no way in hell.
Chinese deposits and off-balance sheet loan growth has collapsed:
http://www.dailycollateral.com/2012/02/29/baml-is-very-worried-by-signs-...
Chinese have been diversifying and if you keep cash in the bank just sitting there you are a god damned fool. Lock that up in bonds for a nice safe 45-60 days at a time and reap annualized 7% return without any effort at all. Or go on a gold buying spree like everyone has been doing.
The government here DOESNT want you to just leave it sitting around and that's why the interest at banks is only 0.5% on cash deposits.
If you are busy running the numbers, let's see the numbers on the big4 exclusively... what you will be seeing is that the big4 are basically doing nothing weird or strange, while the small pointless banks are suffering. Outside of the big4, no one in China cares if a small pointless bank dies or gets eaten up.
Inflation is overblown - when bonds start defaulting, cash is going to look a lot better. And with gold at $1700 an ounce, it's not very appetizing either
China is running out of dance partners to play "extend and pretend" with and needs cash desperately. Thus the rush to turn the Yuan into a viable currency for world foreign exchange. They ar burning through cash at a frightening pace.
You got it.
They want to expand their money supply but have others hold it as reserve. The deficit without tears thingy.
It wont happen until china is more open and transparent with their financial system, but to do that means loss of control in their aurhoritarian command economy.
Either way they lose and we in the usa win.
Uh, we don't win. They will be liquidating our assets they hold. First the bonds, then the ag futures, and then real estate, then whatever they can.
We, being the equivalent of Greece on 'roids lose big time.
Or has the world "deflation" been eradicated in the latest dictionaries by the Fed also?
Gotta love how the fools on this site assume that the Chinese are dumping because of the perceived quality of USTs. Yeah, that story fits in with your end of the dollar theory, but it's also a delusion.
Ask yourself this, why did China buy treasuries in the first place? Now think about what would cause China to need fewer treasuries. See where this is going?
Did you miss the various parts in the article that talk about "trade surplus" (or lack thereof)?
I should have been more clear. I meant the fools commenting on this article (see first few comments). I don't take issue with the article itself.
You cant change their minds. Just fade their foolish investments if any of these basement dwelling china lovers still living with their parents actually have any.
In a few years all this will be perfectly clear in hindsight.
"In a few years all this will be perfectly clear in hindsight."
My crystal ball is crystal clear on the future. Benny carrying the bag (sack of shit) from Wall Street and Washington (Bennys bag is full of their crap already)
Next piss-easy question please...
http://www.youtube.com/watch?v=PErUiAyVoGc I figure that a song can say it better than I could, ever..http://www.imf.org/external/pubs/ft/wp/2012/wp1255.pdf
Coincident Indicators and Capital Flows
Capital flows in Real Time (nearly real time)
http://www.epfr.com/
This is reported numbers only..
No Batts? http://www.batstrading.co.uk/market_data/dark_pool/ how can you track th demise of Europe and thusly the First Wave of Contagion?
I wont even touch how much money is leaving China via http://fixglobal.com/content/dark-pools-asia-real-story.
I have a Spread sheet with $15 Trillion in loans from the FED https://docs.google.com/spreadsheet/ccc?key=0Aq7CIo3B6RWfdDlTRWk5SnVOTUp1bG4wMXdPMnV2SUE
So? what exactly are these guys offering?
Public info for a fee?
Kudos! there's a sucker born every minute!
The Brits may be bastards, but they are not stupid.
Buying Russia is buying the future of Europe. Follow the pipelines.
Edit: Clarification - The Brits are bastards for foolishly disarming the lower classes. Crime is still soaring.
My favourite part is that Ireland have bought treasuries to the tune of 25% of their GDP over the past year. And the Belgians have bought to the tune of 20% of their GDP.
If this is to believed, of course.
What's going to be Bernanke's excuse when the shit really hits the fan?
His mandate is price stability and full employment, he's not caught up in the day-to-day operations of shit and fans.
Wierd, treasuries still super well bid despite this news of China/Russia etc dumping all their holdings. Shadow buyer anyone?
This is Premier Putin on the line. Is this Premier Jaiboa? Oh yes,
please. Good to hear your voice today. Sorry about election disturbance, but sheeple will fall back in line soon. No problem. Comrade Jaibao, are we still good on fiscal policy: dump dollar notes and store all gold production while buying western gold leasing? Oh yes, yes, Comrade. As they say in American Zero Hedge "Stackem, Bitchez!" Ha-Ha-ha! But not too fast, Comrade. Are you going to squeezes good and hard Europe on gas this frigid winter? Yavoh, Comrade. Are all currency exchanges now set with Mullahs, Chavez, Turkey, the Red Dots and the two of us? All clear and look forward to doing increasing business without but-wipe dollars! Hah-hah-hah! We even are buying Japanese Bonds. Join with us, She will make a fine colony soon. Call back on high secure line regarding Gulf operations. Yes, yes. Right away, Comrade. Click!
"most likely from within"
Well, the good thing is that when the Fed ends up with most or all of the US debt it does not have to worry about being subordinate to itself.
But with all the movement towards international socialism in the US, will it subject its bonds to foreign law?
If the Fed ends up owing all the debt then it really doesn't have to be paid, right?
The U.S. Treasury is obligated to redeem maturing Treasury Bonds held by the Federal Reserve.
The Federal Reserve is obligated to turn the proceeds from maturing Treasury Bonds it holds over to the U.S. Treasury.
So when the Federal Reserve buys US Treasuries with "money" it creates out of thin air (Quantitative Easing 2) we have monetization of the debt. A caveman could understand the circularity.
That's why there's a TWIST.
Tippy. I say there, Good Sir. If The Bernanke prints and buys every once and future US bond, then ought not he to say to Timah, "Your country's debts are forgiven. Go, and sin no more." This could be bullish, but not perhaps for GLD. But it doesn't seem right, somehow. But who would object?
I smell something funny in here.
+5 for the avatar!
As world trade decreases it's normal for bond purchases to decrease as income for trade surplus countries decrease-also alot of the supposed 3 trillion in foreign reserves that are held by China are really not reserves that China can do what it wants with-
That is hot money sitting there and it has a two way flow-in and out-We seen it move out in 3 days of heavy demand in 2008 and if China experiences any sort of crash-look for the hot money to vacate China just as fast-
I'm sure the Chinese have that foreign investment money sitting in short term US paper so it can easily be accessed-
Those who think the Yaun has a hope in hell of becoming a reserve currency should understand why China holds hot money in reserves-
The reason is because the Yaun is not liquid enough to take to the currency floor and convert back into other currencies-in a panic-
Their banks are not equipped to handle the hot money flows-unless it already sits in whatever foreign currency that is called upon-
at that rate it would take them about 10 months to ditch the rest
There is nothing on earth that is finer
Than all the cheap stuff made in China
It may not be strong
Or work very long
But at least it leaves cash for the diner
It's no wonder that Chinese tourists don't spend much money on t-shirts or other stuff, when everything in the souvenir shops is made in China in the first place.
Imagine going on holidays and all you find to buy is shite made by your own co workers.
Good business model this tourism is LOL.
China is confused with BS stats a plenty.
China is buying Japan...
http://www3.nhk.or.jp/daily/english/20120226_21.html
He says many Japanese firms that cannot obtain loans from banks are having to rely on Chinese funds to keep their businesses afloat.
He predicts there will be more cases like this in the future.
Did you catch the recent JPY capital spending print? +7.6% on est.-6.4%. If China is buying Japan , it's a proxy to Europe.
Ya got to love it, and Merkozy thinks a " global transaction tax", would fix all the EU's Ills. Cameron & Co. and London( financial district), must be giggling their arses off!
I think lessening UST holdings by China is probably more attributable to higher internal consumption than weakening exports. I do believe that China's exports probably are weakening as a result of softer demand due to lackluster growth in developed countries. Those developed countries are printing money left and right and have substantial social safety nets. China has been putting a lot of new cars and trucks on the roads the past 5 years. I would expect gasoline and diesel fuel demand in China to be a better guage of China's exports than its UST holdings.
Years ago... I had this thought... when economic shit hits the fan, it's going to have global implications... and now we're seeing what that looks like.
I'm now having another thought... the first shot to be fired at an enemy in the next great world war... will be done from the office of a central bank.
If the Fed buys treasuries...would that be like Bennie playing with Timmy or just Ben playing with himself?
This could be a sign that indeed inflation is much higher than the 'official' reported figures and instead of absorbing the excess liquidity from the infrastructure binge they have decided to let their exchange rate marginally appreciate.
Damn you guys KICK Ass! The crosses ( VIA) the yen, are extremely overbought from month end flows. Hint/ Hint
Yo Yen. Everything is overbought. Gold shock has yet to filter through, brutal sell off last session. Now the LTRO is done, EUR shorts will pile up as the PIIGS yields start to go up again.
As for UST's, China is forcing US rates up. Why not? They hold a ton of USDs and will buy more (corp sector) to offset Chinese inflation. The major Gold sell off is indicative of the global markets reacting to the oil inflation blowout. Rates are going up. ECB is the major blame here as Euro bonds get dumped again.
Anyway, major correction on the way.
I love ya Chump666. China is long U.S.
You are seemingly ahead of me? Why ask?
I own some XAG/XAU. Let's get realistic?
I'm short the crosses. I'm also short Northern Europe. Those German Employment #'s are BULL SHIT!
Just like China!
I thought China only had $800 billion in treasuries pre-2008. Did they buy more, and now they're seliing off again, or has my memory failed?
___________________________________
http://www.comparegoldandsilverprices.com/
worse china trade deficit=sell treasury, indeed.
http://www.jinrongbaike.com/
http://www.cnhedge.com/
the chinese are starting to wise up, time for us to also.
http://expose2.wordpress.com
You can't assess fixed income strategies by face value alone. You have to know what's going on under the covers, namely duration. The data series clearly shows that in the aggregate foreign holders have dramatically reduced holdings of bills, while expanding holdings of notes and bonds. Unfortunately it doesn't show this on a country-by-country basis. It's possible that China was stretching its maturities to increase yield, and even participating in Operation Twist at the USG's request.
When rolling from bills to longer maturities within the same issuer you can't reinvest the same amount of money, or you'd be dramatically increasing your duration (aka exposure aka risk) to said issuer. Without knowing which holdings matured or were sold and which were bought, it's impossible to gauge the behavior of any single country from this data. Did China reduce its exposure to US debt? Maybe. Did China maintain its exposure (or increase it)? Again, maybe.
Thanks for the Article! I noticed this morning that China has weaponized food.
First Hillary insulted China for not getting into Syria's affairs:
https://docs.google.com/open?id=0B1EaV_bU7VImQW5hekRkd0xUMi1LdnpBQ2hUelRnZw
Then China finally brokers a deal with North Korea but using America's food for money!
https://docs.google.com/open?id=0B1EaV_bU7VImdVVKTld5U3ZTT1dVcHVOYVRKUlowQQ
china has ben buying up australian farming land that's for sure, and developing their own mining operations