Who the Heck Bought $1.2 trillion in New US Treasuries over the past 12 Months?


by Wolf Richter, Wolf Street:

Russia, Japan, and the Fed dumped. So who bought?
China’s holdings of US Treasury bonds, notes, and bills, after rising in February and March, fell by $5.8 billion in April to $1.18 trillion. Thus, China’s holdings have remained within the same range since August 2017, despite threats of a trade war and rumors that it would dump US Treasuries. China remains the largest holder, a position it had lost during its era of peak capital-flight from October 2016 through March 2017.

Japan has been systematically reducing its Treasury holdings. In April, it disposed of another $12.3 billion, according to the Treasury Department’s TIC data released Friday afternoon. Over the past six months, it shed $63 billion. Since July 2016 it has slashed its holdings by $123 billion, the lowest since October 2011:

This trend is even clearer when the holdings by China and Japan are expressed as a percent of the US gross national debt: Their importance has creditors to the US, while still large, has been dwindling for two reasons:

The US gross national debt has soared.
The holdings of China and Japan have fallen over the past two years.

China’s holdings (red line) as a percent to US gross national debt fell from 6.7% in May 2015 to 5.6% in April 2018. Japan’s holdings (blue line) fell from 6.1% to 4.9%. Their combined holdings (green line) fell from 12.8% to 10.5%:

And a sharp-edged curiosity: Russia.
Russia is a rather insignificant holder of US Treasuries. In March it was in 16th place with $96.1 billion in Treasury holdings. But in April, it cut its Treasury holdings in half, to $48.7 billion in one fell swoop, which put it into 22nd place behind the UAE and Thailand. Since August last year, it slashed its holdings by 55%. Some kind of message?

The good thing is that Russia doesn’t have that many Treasuries left to sell – unlike China or Japan. It China and Japan started to pull a Russia, the scenario would be different.

Other countries added to their holdings, and the “grand total” of Treasuries held by official (central banks, governments, etc.) and non-official foreign investors fell by $47.6 billion to $6.17 trillion, smack-dab in the middle of the range of the past year.

Many of the top holders of Treasuries – after China and Japan – are tiny countries or jurisdictions with inexplicably huge balances. They include tax havens and alleged money laundering centers.

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