December 2009: Foreign Holders of US Treasuries

[c1ue]

As has been noted on ZeroHedge, China has sold off $34.2B in Treasuries in December.

More interestingly, the net holdings of Foreigners for US Treasuries rose only $16.9B in December 2009, with full Q4 2009 purchases netting $116.6B

The good news: net Treasury issuance was only about $260B in Q4 2009 as opposed to the $350B originally estimated. Thus the foreign coverage rate was not as low as feared - especially since the UK comprised 46%+ of the overall purchases.

But from a deficit funding perspective this is a problem. A $1.5T annual deficit for the foreseeable future does not jibe well with merely $260B of quarterly net Treasury issuance.

Net Treasury issuance for all of 2009: $1.376T

	Dec	Nov	Oct	Sep	Aug	Jul	Jun	May
Country	2009	2009	2009	2009	2009	2009	2009	2009
	------	------	------	------	------	------	------	------
Japan	768.8	757.3	745.9	751	730.6	723.9	711.2	677.2
China, Mainland	755.4	789.6	798.9	798.9	797.1	800.5	776.4	801.5
United Kingdom 2/	302.5	277.6	230.1	248.8	226.4	219.4	213.4	163.7
Oil Exporters 3/	186.8	187.7	188.4	185.3	189.2	189.3	191.2	192.9
Carib Bnkng Ctrs 4/	184.7	179.8	170.6	173	181.3	194.5	191	195.2
Brazil	160.6	157.1	156.2	144.9	137.3	138.1	139.8	127.1
Hong Kong	152.9	146.2	142	132.2	124.7	115.3	99.8	93.2
Russia	118.5	128.1	122.5	121.8	121.6	118	119.9	124.5
Luxembourg	99.9	91.7	91	99	94.4	92.2	104.3	96.2
Taiwan	79.6	78.4	78.7	78.1	75.9	77.4	77	75.7
Switzerland	76	75.8	71.5	68.9	68.2	68.1	71.5	63.7
Germany	52.7	53.6	52.9	53.7	55	56.1	53.8	55.1
Canada	48.3	46.2	40.3	37.7	25.7	19.6	18.4	11
Ireland	39.3	38.8	38.3	32.7	36.6	38.7	46.3	50.6
Korea, South	39.2	39.1	42.2	38.8	38.7	37.6	36.3	37.4
Singapore	38.1	36.4	35.2	38.3	42	42.3	40.8	39.6
France	37.5	47.5	36.2	32	35	24.6	26	25.9
Thailand	35.4	31.7	30.1	30.1	33.5	31.4	29.7	26.8
Mexico	31.1	26.2	20.7	22.1	27.5	27.7	29.5	31.5
Norway	29.7	26.2	24.9	25.2	24.7	28.9	28.7	28.3
India	29.6	31.6	32.9	35.9	38.5	38.9	39.3	38.8
Turkey	28.3	29.6	30.4	28.2	28.7	27.3	27.5	28.8
Egypt	24.8	25.3	20.2	20.8	20.4	18.6	17.3	18.6
Netherlands	19.8	20.3	19.8	21.3	21.4	21.5	18.9	16.4
Sweden	19.1	19.4	19.2	18.3	16.7	16.5	16.4	13
Italy	18.7	19.1	19.1	17.6	16.9	17.3	16.7	16.7
Colombia	15.8	15.6	16.8	16.8	16.4	14.9	11.8	12
Israel	15.3	16.6	16	18.3	17.7	17	18.1	19
Belgium	15.2	15.3	14.7	15	15.6	15.7	15.7	15.7
Australia	14.1	11.5	10.5	10.1	10.2	9.8	9.9	9
Chile	12.5	12.2	12.5	12.9	13	13.5	14.3	14.7
Philippines	12.2	12.2	11.9	11.8	12.4	11.4	11.6	11.8
Malaysia	11	11.1	11	11	11.2	11.9	11.7	12.3
All Other	140.7	142.3	146.4	146.7	148.5	149.7	147.5	148.6
Grand Total	3614	3597.1	3498.1	3497.4	3453.1	3427.5	3382.1	3292.6
Of which:
For. Official	2374.2	2404.6	2384.8	2369.4	2360	2346.1	2295.7	2287.5
Treasury Bills	534.3	586.6	598	597.7	607.3	606.6	571.9	586.2
T-Bonds & Notes	1839.9	1818	1786.8	1771.7	1752.7	1739.5	1723.8	1701.3

Net Treasury issuance data from:
http://www.sifma.org/research/research.aspx?ID=10806

Previous Q4 2009 net Treasury estimate:
http://www.itulip.com/forums/showthread.php?t=14027

[Fiat Currency]

Re: December 2009: Foreign Holders of US Treasuries

More interestingly, the net holdings of Foreigners for US Treasuries rose only $16.9B in December 2009, with full Q4 2009 purchases netting $116.6B

Canada

48.3

46.2

40.3

37.7

25.7

19.6

18.4

11

I noticed the hand of Mark Carney at play. It appears that Canada has increased its holdings by about 400% !!! :eek: I didn't notice any other nation moving so boldly in that direction

[D-Mack]

Re: December 2009: Foreign Holders of US Treasuries

Canada

48.3

46.2

40.3

37.7

25.7

19.6

18.4

11

I noticed the hand of Mark Carney at play. It appears that Canada has increased its holdings by about 400% !!! :eek: I didn't notice any other nation moving so boldly in that direction

The Dec number was 7.8 billion, so it's nearly 650 %
http://www.ustreas.gov/tic/mfh.txt

[big67]

Re: December 2009: Foreign Holders of US Treasuries

Everybody seems to agree UK is a proxy.... some "invisible hand" is going long the dollar.

[c1ue]

Re: December 2009: Foreign Holders of US Treasuries

Everybody seems to agree UK is a proxy.... some "invisible hand" is going long the dollar.

I am not one of the everybodies.

For one thing, it has never been satisfactorily explained what the benefit of buying through the UK is.

We're talking over $170B in the last year.

What possible rationale for China or some similar currency account surplus nation to buy through the UK?

Secondly, the notion that some nation can buy without the US Treasury knowing who it is - is ludicrous. The longer term Treasuries are coupons - meaning interest payments are sent regularly out.

If the US can clamp down on $2000 'terrorist' transactions, are you seriously trying to tell me that the billions of dollars in Treasury interest cannot be traced?

Thirdly the UK itself is in an odd position - it is fiscally bankrupt, but has been an ardent supporter of the US. It is entirely conceivable that the UK is itself doing this - building a 'foreign currency reserve' so that its recent historical partnership with the US can be preserved.

Lastly even if the conspiracy theory is taken at face value - who is the entity with the most to gain through such shenanigans? Hint: It isn't another country.

[FrankL]

Re: December 2009: Foreign Holders of US Treasuries

not just the UK, also Hong Kong holdings have increased considerably over the past year.

While I agree that it's ludicrous to believe that you can fool the US treasury by covertly buying, maybe the reason is much simpler:
China CP seemingly appeasing its own populace' anti-US feelings by pretending to punish them (the US) through selling bonds.

If true, it implies that they still have a good reason to recycle trade their surplus into US gov. bonds.

[c1ue]

Re: December 2009: Foreign Holders of US Treasuries

not just the UK, also Hong Kong holdings have increased considerably over the past year.

While I agree that it's ludicrous to believe that you can fool the US treasury by covertly buying, maybe the reason is much simpler:
China CP seemingly appeasing its own populace' anti-US feelings by pretending to punish them (the US) through selling bonds.

If true, it implies that they still have a good reason to recycle trade their surplus into US gov. bonds.

That is a good point.

This at least is a credible argument, though the China spending spree with dollars still brings into question just how much China could spend on Treasuries.

China's trade deficit with the US in 2009 was $226B; it seems highly unlikely that $150B+ was available to buy Treasuries in the UK and $50B+ in Hong Kong.

As for punishment: if China really is still buying, then the US Treasury is really in big trouble. As previously noted, net foreign purchases of Treasuries was only about $530B in 2009 vs. a $1.376T net issuance.

The Fed bought $300B, and the banks have some significant chunk via their reserves, but there simply isn't that much more slack available. All that can be done is either another Fed QE (disastrous), further expansion of bank reserves (also disastrous), or pulling more of the US' population's savings in (most likely will be attempted).

[big67]

Re: December 2009: Foreign Holders of US Treasuries

I am not saying the "invisible hand" is invisible to the US Treasury, but for some reason it will not disclose this information to the public.
Would investment banks or hedge funds fit in the picture?

[GRG55]

Re: December 2009: Foreign Holders of US Treasuries

...The Fed bought $300B, and the banks have some significant chunk via their reserves, but there simply isn't that much more slack available. All that can be done is either another Fed QE (disastrous), further expansion of bank reserves (also disastrous), or pulling more of the US' population's savings in (most likely will be attempted).

Or raise the interest rate to that needed to keep an adequate level of foreign buyers at the table...

[big67]

Re: December 2009: Foreign Holders of US Treasuries

If interest rates start to rise significantly it will be game over for US, Japan and most of Europe as well.

A 100% GDP debt in a mild 5-6% interest rates environment will eat fiscal resources as a black hole, crash the healing housing market, scare investors away of equities and crash the real economy into deflation.

[c1ue]

Re: December 2009: Foreign Holders of US Treasuries

Or raise the interest rate to that needed to keep an adequate level of foreign buyers at the table...

As big67 noted - a sustained rise in interest rates will produce the anvil on the back of the United States for the next generation.

IMO rising Treasury interest rates will be an effect, not a cause... unless indeed the 100% inflation/5 year iTulip scenario is indeed negotiated gracefully and a Volcker stop is induced.

But that scenario looks less and less likely as the US continues to dig its fiscal deficit hole deeper.

[GRG55]

Re: December 2009: Foreign Holders of US Treasuries

If interest rates start to rise significantly it will be game over for US, Japan and most of Europe as well.

A 100% GDP debt in a mild 5-6% interest rates environment will eat fiscal resources as a black hole, crash the healing housing market, scare investors away of equities and crash the real economy into deflation.

Show me a scenario, even one with interest rates that do not rise, that does not end in the same result...

As big67 noted - a sustained rise in interest rates will produce the anvil on the back of the United States for the next generation.

IMO rising Treasury interest rates will be an effect, not a cause... unless indeed the 100% inflation/5 year iTulip scenario is indeed negotiated gracefully and a Volcker stop is induced.

But that scenario looks less and less likely as the US continues to dig its fiscal deficit hole deeper.

Welcome to the "zero degrees of freedom" policy environment...

[jk]

Re: December 2009: Foreign Holders of US Treasuries

I am not one of the everybodies.

For one thing, it has never been satisfactorily explained what the benefit of buying through the UK is.

We're talking over $170B in the last year.

What possible rationale for China or some similar currency account surplus nation to buy through the UK?

Secondly, the notion that some nation can buy without the US Treasury knowing who it is - is ludicrous. The longer term Treasuries are coupons - meaning interest payments are sent regularly out.

If the US can clamp down on $2000 'terrorist' transactions, are you seriously trying to tell me that the billions of dollars in Treasury interest cannot be traced?

Thirdly the UK itself is in an odd position - it is fiscally bankrupt, but has been an ardent supporter of the US. It is entirely conceivable that the UK is itself doing this - building a 'foreign currency reserve' so that its recent historical partnership with the US can be preserved.

Lastly even if the conspiracy theory is taken at face value - who is the entity with the most to gain through such shenanigans? Hint: It isn't another country.

middle eastern petroleum exporters have some fear of frozen accounts should the political winds shift in certain directions. plus they have investment offices in the uk which are, in fact, managing portfolios for them.

[bart]

Re: December 2009: Foreign Holders of US Treasuries

I am not saying the "invisible hand" is invisible to the US Treasury, but for some reason it will not disclose this information to the public.
Would investment banks or hedge funds fit in the picture?

Russia (solid blue line) and the Caribbean (red line) could qualify...