China Now the Biggest Seller of U.S. Treasuries

Includes: CNY, CYB, UDN, UUP
by: Mark Anthony

Please read the title twice to make sure you read it right.

That's right, China is now the Biggest foreign SELLER, not buyer, of US treasuries. Meanwhile the mainstream media keeps telling you that China is the biggest foreign buyer of US treasuries.

The data from US Department of Treasury says otherwise. Based on the latest official data available, which is December, 2009, China's US treasury holdings dropped from $789.6B in November, 09 to $755.4B in December, 09, a $34.2B drop in a month. That's the biggest net selling among all foreign holders.

China is no longer the biggest foreign holder of US treasuries. The bigger sucker is Japan, who now with its $768.8B holdings, pushes China to the No. 2 spot. But the bigger sucker is the UK, who increased its US treasury holdings by $24.9B in a month. UK is the biggest buyers among all foreign central banks.

You would wonder where the UK got all the US dollars to buy US treasuries. Unlike countries like China and Japan, who have a trade surplus against the USA and hence accumulate US dollars through bilateral trades, the UK has a big net trade deficit against the USA.

There must be a US Dollar Carry Trade going on, the REAL US Dollar Carry Trade that no one is willing to talk about, which allows the US dollars to flow to the UK and then be used to purchase US treasuries.

The US dollar is finished. If China has already made such a big move in December to dump the US dollars, it must not be taking timid steps by now. Others will also follow suit soon. We shall see as time goes and more recent data is released.

Commodities, which China is stockpiling massively, are the only safe havens. No paper asset is safe, not even the Chinese yuan.

Disclosure: The author has no particular positions directly related to the discussion of this article. The author's entire investment thesis, however, is based on the demise of US dollar and relative appreciation of precious metals and commodities.