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China Drops 97% of Short Term Treasuries Since 2009

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limitgov Posted: Fri, Jun 3 2011 7:31 PM

http://cnsnews.com/news/article/china-has-divested-97-percent-its-holdin

(CNSNews.com) - China has dropped 97 percent of its holdings in U.S. Treasury bills, decreasing its ownership of the short-term U.S. government securities from a peak of $210.4 billion in May 2009 to $5.69 billion in March 2011, the most recent month reported by the U.S. Treasury.

Treasury bills are securities that mature in one year or less that are sold by the U.S. Treasury Department to fund the nation’s debt.

Mainland Chinese holdings of U.S. Treasury bills are reported in column 9 of the Treasury report linked here.

Until October, the Chinese were generally making up for their decreasing holdings in Treasury bills by increasing their holdings of longer-term U.S. Treasury securities. Thus, until October, China’s overall holdings of U.S. debt continued to increase.

Since October, however, China has also started to divest from longer-term U.S. Treasury securities. Thus, as reported by the Treasury Department, China’s ownership of the U.S. national debt has decreased in each of the last five months on record, including November, December, January, February and March.

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Joe replied on Sun, Jun 5 2011 9:24 PM

who are they selling it to?

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Bogart replied on Mon, Jun 6 2011 9:57 AM

The Fed or one of the member banks who sells it back to the Fed.  Who else would lock up 10 to 30 years at a whopping 4 to 5 percent yield when you can buy a bond or a stock from a NON-US utility or energy company and for the same risk, bankruptcy on the energy company and inflation on the USG you get the increase in price in US Dollars for free.

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So Fed will buy it back, and what then? Will they dissolve that money or will they dump it to excess reserves and pay interest from it like with QE's?

-- --- English I not so well sorry I will. I'm not native speaker.
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Bogart replied on Mon, Jun 6 2011 5:03 PM

What then, more accurately state, what NOW?  The Fed is buying 70% of Federal Bonds and is now the largest holder of US Gov Bonds in the world.  The Chinese have taken cash or purchased longer term bonds with their redeemed short term bonds.  But the issue is that the US Gov with needs 1.5 trillion in bond sales just to make up for the budget shortfalls.  So the 6.4trillion dollar question is who will buy US Gov AAA rated bonds at these yields other than the US Fed and its member banks?

 

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