Here are a couple of Charts I made regarding Foreign Holdings of Treasuries. Specifically, I focused on China, as they own over 25% of the total foreign holdings of US Treasuries as of the latest data available (July 2011). I obtained the data from http://www.treasury.gov/resource-center/data-chart-center/tic/Documents/mfh.txt and http://www.treasury.gov/resource-center/data-chart-center/tic/Documents/mfhhis01.txt. Then I simply imported it into excel, and converted China's holdings into a Percentage of the total foreign holdings and plotted it out on a chart.
People went crazy from 2008 through 2009 when China was selling treasuries, and again in July 2011 when China finished its long-term sale of treasuries. Now it seems China is a buyer of US debt once again. One can make many assumptions about China, but lets look at some of the hard data before drawing some conclusions.
First up is the data from July 2010 to July 2011
As you can see, in 2005 China had a relatively small percentage of total foreign US treasury holdings, but has increased its share steadily for the past seven years. In 2008, during the worst of the financial crisis, it seems that China sharply increased its purchase of treasury debt instruments.The questions that looms is, "why?" We can see that in 2011, China has sold off some of its holdings, but still has a considerable position (on average). Again, "why"? Why would one run to these debt instruments, when it is clear that rampant debt is the problem?
I can tell you this: If China ever decided to liquidate its treasury holdings, the US would be in a world of trouble. With the ridiculous new legislation the US levied against china's devaluation of it's own currency, the possibility of this happening grows. Chinese officials, in fact, did announce in September that China wishes to liquidate its holdings of US treasuries. Uh oh.
I wonder if it is shaping up to be a good time to be (at least things and strategizing about) shorting bonds?
Until next time ...
Peace!
People went crazy from 2008 through 2009 when China was selling treasuries, and again in July 2011 when China finished its long-term sale of treasuries. Now it seems China is a buyer of US debt once again. One can make many assumptions about China, but lets look at some of the hard data before drawing some conclusions.
First up is the data from July 2010 to July 2011
From this micro-perspective, it looks like China has eased off quite a bit on its treasury holdings, and is perhaps starting to become buyers again. However, let's take a look at a more macro perspective on China's history of buying Treasuries. The following chart is the yearly average from 2005-present.
As you can see, in 2005 China had a relatively small percentage of total foreign US treasury holdings, but has increased its share steadily for the past seven years. In 2008, during the worst of the financial crisis, it seems that China sharply increased its purchase of treasury debt instruments.The questions that looms is, "why?" We can see that in 2011, China has sold off some of its holdings, but still has a considerable position (on average). Again, "why"? Why would one run to these debt instruments, when it is clear that rampant debt is the problem?
I can tell you this: If China ever decided to liquidate its treasury holdings, the US would be in a world of trouble. With the ridiculous new legislation the US levied against china's devaluation of it's own currency, the possibility of this happening grows. Chinese officials, in fact, did announce in September that China wishes to liquidate its holdings of US treasuries. Uh oh.
I wonder if it is shaping up to be a good time to be (at least things and strategizing about) shorting bonds?
Until next time ...
Peace!
