Remember back in March when I stated that China was secretly dumping US Treasuries? Well some of that truth about their aggressive divestiture has started to leak out…
(Zerohedge) When one thinks US Treasurys, and demand thereof, two entities pop into mind: the Federal Reserve, which over the past 3 years has been the biggest institutional buyer of US paper, and China, which is the largest foreign holder of US TSYs. Yet over the past year something curious happened: when it comes to setting marginal demand for US Treasurys, it was neither the Fed, whose sterilized Operation Twist has kept its holdings of US Tsys relatively flat, nor China, which has actually been a major seller of US paper, that has been the dominant source of marginal demand for Uncle Sam’s never to be repaid obligations. Japan. (see my comments on Japan’s economy here)
That’s right, as the chart below shows using TIC data, even as China was quietly selling its paper (and that accounts for UK holdings, aka Chinese offshore operations) in the beginning of the year, taking its total from over $1.3 trillion to $1.15 trillion in December, where it has stayed without moving at all in 2012 as China entered a buyer’s strike mode, it was Japan who quickly stepped in to fill the void. And what a void it has filled. According to TIC data, Japanese holdings of US paper have soared from $882 billion in June 2011 to a whopping $1119 billion a year later. In the process the spread between Chinese and Japanese holdings of US TSYs has collapsed from $430 billion to a tiny $43 billion and at this rate Japan will overtake China as the top foreign holder of US paper within 3-4 months!
I would assert that the decline in China’s holdings of US Treasuries actually far outpaces what this graph depicts – what is documented in this article is the ‘Open Divestiture’, but the back-channel sell off may more than double China’s total selloff of USTs. As I stated in my previous article, the “direct, secret channel” between the FED and Beijing is all about keeping China’s massive divestiture of USTs quiet, so as not to cause alarm – - YET. When the time comes, and they are ready to bring everything together, then it will be brought down, and swiftly. They have been engineering this for over 50 years, and they will surely take their best swing to make it happen, at the moment when it best suits them.
As an additional data point, China is also Dumping US-listed Equities, and moving Chinese companies to non-US markets for their Equity offerings. There is a very large game afoot here, which will ultimately affect us all. The ONE THING which China is still aggressively buying in the US is Real Estate… What does that tell you?
Now for the Trillion Dollar Question – “Who is really buying the US Treasuries (which China is dumping), and why?” I guarantee you it isn’t Japan…
WE HAVE BEEN WARNED
~Those who abuse Liberty, do so at their own peril!