Today's TIC data showed something disturbing: for the fourth month in a row, foreigners were net sellers of US Treasury paper in July, as total foreign holdings declined from $5.600 trillion to $5.590 trillion which represents 49% of total marketable debt (including the debt owned by the Fed of course). In other words, since peaking at $5.724 trillion in March, foreign-held debt has declined by $134 billion, at a time when yields have surged on fears the Fed's tapering of its own purchases of bonds will mean less Fed frontrunning opportunities.
Broken down be long-term security, the picture was slightly different, when following last month's record dump of all LT securities held by foreigners, there was a sharp rebound in long-term bonds (non-bills) held by official and unofficial foreigners, who after selling $40.8 billion in LT TSY paper, sprung to buy some $33.9 billion. Ironically it was just after that, that yields blew out by a further 30 bps.
Also of nor in the chart above: while there was buying of TSYs and MBS, foreigners continued to sell Corporate Bonds and Stocks (for the third month in a row).
However, it is only when broken down by gross purchaser, that we see just who is to thank for this surge in buying of Treasury paper in the month of July. One look at the chart below should explain it:
Putting this epic buying spree by Mr. Abe and Mrs. Watanabe in perspective, here is Japan's TSY transactions compared to the activity of America's largest foreign creditor nation: China.
In other words, in July, when "everyone else" sold a total of $62.5 billion, Japan bought a mindblowing $52 billion. This is happening just as a nuke-free Japan now cements its status as one of the world's largest deficit nations. Not to mention its demographics. Not to mention that the BOJ needs every marginal dollar used to purchase its own bonds to keep rates low, or else...
But the good news: now that the Fed is slowly but slowly but surely stepping away (and as Russia continues to dump its Treasurys selling another $6 billion in the last month), and as the Great Rotation has got mom and pop concerned they may not be able to BTFATH, here comes Japan to the rescue, and buys up all the paper that nobody thought would find a buyer.