One month ago when looking at the December update of [6]foreign holdings of US Treasuries, and specifically the two largest foreign creditors, we said that China "sold another $6 billion in Treasurys in the last month of 2014, which would have made its US treasury holdings equal with those of Japan, if only Tokyo hadn't also sold over $10 billion in the same month."
Moments ago the January update was released [7], and while China continued selling US paper, liquidating another $5.2 billion in January and bringing its new total to the lowest since January 2013, Japan - yes that Japan whose central bank is now moentizing 100% of its own debt issuance because the country is now effectively insolvent and absent constant monetization of its debt it is finished - bought $8 billion in US debt, in the process trying China as America's largest foreign creditor for the first time in history, with both nations holdings $1.239 trillion in US TSYs.
[8]
But where things got truly surprising, is when looking at gross long-term flows of foreign capital [9], where we find that between private and official buyer and sellers of US assets, in January a record $55 billion in US Treasurys was sold - precisely in the month in which the yield on the 10Y plummeted, indicating once again that a short squeeze in syntehtic exposure via futures and derivatives (because shorting the 10Y was the other most popular hedge fund position [10]entering 2015 alongside being long the USD) has far greater price formation power than what someone does with a measly $55 billion in underlying Treasurys (very relevant for the debate of physical vs paper gold) in any one month.
[11]
