China Dumps $100+ Billion In USTs In December Per Revised TIC Data; UK Is Now Russia’s Shadow Buyer .. by Tyler Durden

By Fred Brownbill on March 5, 2012 in News

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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About Fred Brownbill

Fred Brownbill was born and raised in Rhodesia in 1955 before moving to South Africa in 1970 where he continued his education graduating from Christian Brothers College in 1973. He then returned to Rhodesia and fought on active service attached to a special anti-terrorist unit for seven years in that Country's terrorist war before taking the very good advice of others and leaving when Independence was announced and a Marxist Government under Robert Mugabe took over. Fred was Stateless and very unsettled and from 1980 travelled around much of the world on motorcycles while maintaining a residence in England for 14 years. He managed the largest motorcycle retail company in Europe during this period, and continued his travels as often as possible. Fred has raced motorcycles both as a drag racer and road racer, competing in Southern Africa and England . He immigrated to the United States in October of 1994, becoming a proud and legal U.S. citizen in 2003. Today, Fred works as a Deputy Sheriff in Florida. He is the President of the Save America Foundation. He is also a member of Oath Keepers and various other local and national Conservative Patriotic groups. He is active as a public speaker at different groups and locations. He has been interviewed on various different national radio and live internet radio and TV programs. His writings are published in many places and read and followed by tens of thousands of people in the States and abroad, and his message of freedom and liberty is an International message that gives hope to all those seeking freedom. He is married to Marty, an advisor to the Board of the SAF, and they have 2 daughters, one in California and the other in Florida. Both he and Marty are still each riding motorcycles, doing thousands of miles a year, and take as many trips both in the States and abroad when they can.

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