March 01, 2010

Update: Major Holders of US Treasuries

The Department of US Treasury announced the revised numbers of major foreign holders of US Debt in their most recent update.  Based on the new data, China - not Japan - was indeed the number one holder of US Treasuries holding a total $894.8 billion worth of US Treasury securities at the end of December 2009.  Japan in second place held a total of $765.7 billion, $129 billion less than China.  See both data for current and previous data in the charts below. 

     Updated Chart      Previous Chart
Tr-Holdersupdate-2010-0226 Tr-Holdersprev-2010-0216

We have previously wondered what, if any, impact a decline in Chinese holdings of US Treasuries would have.  We also considered whether the recent hike in the discount rate would be some sort of a token gesture to the Chinese that potentially higher yields may be an incentive to keep buying those Treasuries.  While the revised US Treasury data show that China is indeed still holding the largest amount of US Treasuries, there is somewhat of a trend, albeit minute thus far.  Both data sets show that China has been reducing its US Treasury holding by $45 billion since last summer.  But it is far to early to assume that significant changes in Chinese holdings may take place.  Comparing the recent data with a longer-term view (end of year data), it does however show where China came from and what a potentially devastating effect on Bond markets could ensue if China were to reduce these US Treasury holdings to anywhere close to a level from a decade ago.


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