Tuesday, June 18, 2019

Ok, The Fed and China Have Been Selling Treasuries, Who's Been Buying?

From Wolf Street:

Who Bought the Nearly $1 Trillion of New US Government Debt over the Past 12 Months?  
The Fed & China dumped. But there was huge demand elsewhere. Here’s who bought.
The US debt-ceiling charade is back. It’s where different political power groups in Congress stall legislation that would raise the maximum amount of money the government is allowed to borrow to fund what Congress had ordered the government to fund. It’s a game of chicken that can push the US government into default, to the bewilderment of the foreign creditors of the US that are holding a big part of this debt that would default.

The debt ceiling went into effect on March 1. Since then, the government has not been allowed to increase its debt, which had just exceeded $22 trillion. But the government, as told by Congress, will continue to deficit-spend, and fund this deficit-spending by robbing Peter to pay Paul. This works for a few months, until Peter has nothing left to rob. That’s the out-of-money day, on which the government will not be able to redeem Treasury securities that come due, followed by stunning financial fireworks across the globe. On the other hand, when the debt ceiling is lifted, default is averted, and the gross national debt jumps by $800 billion or so in a couple of weeks:
The Treasury Department disclosed this afternoon (TIC data) how much of this debt that gets so iffy during every debt-ceiling fight was held by foreign investors through April, and how much they bought or dumped.

This is a question that is getting increasingly nerve-wracking as this debt is ballooning even in good economic times, while practically no one in Congress or the White House even pays lip-service to fretting about it anymore.

Everyone knows, including the foreign holders, that this debt will balloon into the stratosphere when the economic cycle turns. So here we go.

All foreign investors combined – “foreign official” holders, such as foreign central banks and government entities, and foreign private-sector investors – raised their holdings of Treasury securities over the 12-month period through April by $253 billion, to $6.43 trillion.

But over the same period, the total gross national debt soared by $960 billion, to a tad over $22 trillion. And the share of the US debt held by foreign holders dropped to 28.8%, down from the 34%-range in 2012 through mid-2015:
The Big Two Foreign Creditors of the US.
China, the largest foreign creditor of the US, dumped $69 billion of its Treasury securities over the 12-month period, including $17 billion just in March and April. At the end of April, China’s holdings were down to $1.11 trillion (the peak: $1.25 trillion in February 2016).

Japan, the second largest foreign creditor of the US, added $32 billion in Treasury securities to its holdings over the 12 months, even after shedding $14 billion in April, to $1.06 trillion (the peak: $1.24 trillion at the end of 2014):...