Tuesday, March 16, 2010

China Sharply Reduces Buying of US Treasuries: Monthly Net TIC Flows Were Negative $148.9B

You don't see much of this in the news, but China and Japan, the two countries which are the largest holders of US Bonds, reduced their positions in January. Net Long-term TIC Flows, which were expected around $47.5B were only $19.1 billion, a massive 60% below expectations.

Foreign holders sold a net $33.4B in January, after buying of $53.6B in December.

In the meantime, U.S. politicians continue to pound away at China for not revaluing the Yuan. However, if this situation continues interest rates in the US will have to rise to attract buyers/

China has been a net seller of US Treasuries for three months now.

Here is the Press Release:

Washington —The U.S. Department of the Treasury today released Treasury
International Capital (TIC) data for January 2009. Net foreign purchases of
long-term securities were negative $43.0 billion. Net foreign purchases of long-term U.S. securities were negative $18.8 billion. Of this, net purchases by private foreign investors were negative $10.2 billion, and net purchases by foreign official institutions were negative $8.5 billion. U.S. residents purchased a net $24.2 billion of long-term foreign securities. Net foreign acquisition of long-term securities, taking into account adjustments, is estimated to have been negative $60.9 billion.
Foreign holdings of dollar-denominated short-term U.S. securities, including Treasury bills, and other custody liabilities increased $30.9 billion. Foreign holdings
of Treasury bills decreased $15.4 billion. Banks’ own net dollar-denominated liabilities to foreign residents decreased $118.9 billion. Monthly net TIC flows were negative $148.9 billion. Of this, net foreign private flows were negative $158.1 billion, and net foreign official flows were $9.2 billion.

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