Wednesday, January 18, 2012

China Still Buying Treasuries

I feel like a broken record, but once again the mainstream media and fear-mongering finance blogs get the Chinese Treasury holdings data wrong. Here's Zero Hedge:

Today's TIC data confirmed what Zero Hedge readers have now known for quite some time: namely that foreigners are selling US paper. And while we have used contemporaneous Custody Account data from the Fed to present that in the past 7 weeks foreigners have sold a record amount of bonds, we now get confirmation via TIC that in November the selling continued, especially at the biggest non-Fed holder of US paper, China, which saw its holdings down to $1,132.6 billion, the lowest in the past year.
As EconomPic readers know, China's purchases are just flowing through the United Kingdom (and are later revised to China... see here, here, and here for a few examples).



I did note last month that:
The pace of growth in Chinese purchases of Treasuries has declined rather dramatically (in percentage terms). This may prove to be a smaller issue for the U.S. in terms of Treasury demand (the smaller percent is off a larger base, so in $$ terms the growth is still significant), but it may reflect the difficulty China may have growing their export driven economy at the scale required to prevent social unrest, as global aggregate demand has waned.
Source: Treasury