- The Financial Times – China holds $1,160bn of US debt
The US Treasury has dramatically revised data on foreign holdings of US government debt, estimating that China owns more Treasuries than previously thought while the UK holds only about half as much. The figures released on Monday suggest fears that China has been reducing its US dollar holdings may have been overstated. - Zero Hedge (Blog) – Chinese Treasury Holdings Revised $268 Billion Higher To $1.12 Trillion, Fed Still Top Holder Of US Debt
Earlier, the Treasury International Capital website released its periodic update/refinement of Treasury holdings. Not surprisingly, the most impacted holders were China and the “UK” which as we had previously speculated was nothing but a custodian front for Chinese institutional accumulation. China, which according to the most recent TIC data, owned $891.6 billion in Treasurys as of December 31, is now said to hold $1,160 billion, an adjustment of $268 billion. This upward revision came almost exclusively at the expense of the UK, which saw its holdings decline by $269 billion, in other words a nearly dollar for dollar shift between the UK and China. Japan, the third largest holder, was virtually unchanged at $882.3 billion compared to $883.6 billion pre revision. Oil exporters also saw a modest drop to $212 billion from $218 billion previously (all numbers as of December 31). Still, even with this adjustment, the Fed continues to be, and likely will never be surpassed, at the top position in terms of Treasury Holdings.
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For the time being it appears as though the foreign central banks, and the People’s Bank of China in particular, are still the primary foreign holders of U.S. debt. Their desire to mask these holdings as long as possible is understandable, and we should expect future revisions to show similar patterns.
In a January Newsclip post, we pointed out that the U.K. accounted for 47% of all foreign purchases of U.S. Treasury notes and bonds in the 12 months ending November 2010. However, we warned that this was a result of the way in which the Treasury collects the data rather than true increased interest from the U.K.
Each month, the Treasury tracks and reports foreign net purchases and sales of U.S. securities. Because these flows are attributed to the country in which the trade originates as opposed to the ultimate buyer, an annual survey is also conducted which tracks the holdings of the major foreign countries. For example, if China wanted to buy U.S. Treasury securities while not alerting the entire world to the fact, they could buy through a financial hub such as the U.K. These flows would show up as U.K. net purchases in the monthly TIC report, and China would not be revealed as the end buyer until the annual survey/revision of foreign holdings is conducted.
The Treasury released its annual revisions to its foreign holdings data yesterday, and as we suspected in our original post, foreign central bank and Chinese holdings of U.S. debt were revised upward at the expense of U.K. holdings. Below we highlight the old holdings of the U.K., the foreign central banks and China in blue, with the revision of each shown in a separate chart in red. The revisions are a one time change in the level of holdings on June 30, 2010.