For the first time this year! China increased its holdings of U.S. Treasuries in April

Finance Associated Press

2024-06-19 11:34Published on the official account of Cailianshe under Shanghai Poster Industry Group

Finance Associated Press, June 19 (edited by Xiaoxiang) On Tuesday (June 18) local time, the U.S. Department of the Treasury released the International Capital Flows Report (TIC) for April 2024. The report showed that foreign investor holdings of U.S. Treasuries eased in April from a record high in March. However, it was a slight surprise that China increased its holdings of U.S. Treasuries slightly during the month, marking the first increase in China's holdings of U.S. Treasuries this year.

China's holdings of U.S. Treasuries increased by $3.3 billion in April to $770.7 billion, the report showed. This is also the smallest change in China's U.S. Treasury holdings (whether increasing or decreasing) in at least one year.

Since April 2022, China's holdings of U.S. Treasuries have been below $1 trillion. After reducing its holdings in March, China's holdings of U.S. bonds briefly fell below the low of $769.6 billion in October last year, further hitting a new low since March 2009.

This time, although China slightly increased its holdings of U.S. bonds in April, the cumulative scale of its holdings during the year is still as high as 45.6 billion US dollars, and the overall trend of reducing holdings is difficult to say that it has changed.

In terms of the trend of US Treasuries, US Treasury prices weakened significantly in April, and US Treasury yields, which are inverse to the price, rose all the way as reports showed that US inflation remained stubbornly above the Fed's 2% target and a series of economic data remained strong, leading to a cooling of investors' expectations for the Fed to cut interest rates this year.

The yield on the benchmark 10-year Treasury note eventually surged sharply from 4.194% to 4.612% during the month, while the yield on the two-year Treasury note rose from 4.603% to 5.046%.

Interestingly, previously released data showed that the pace of China's central bank gold purchases slowed down in April. China's central bank gold reserves stood at 72.8 million ounces at the end of April 2024, up 60,000 ounces (1.7t) from the previous month and the slowest increase since November 2022, data released by the People's Bank of China last month showed.

The slowdown in the pace of China's central bank (PBOC) build-up to gold holdings and the temporary pause in its efforts to reduce its holdings of US Treasuries both occurred in April. Is this a coincidence or a temporary break after a large number of buying and reducing holdings in the early stage? Investors may wish to keep an eye out for more data in the future.

Most of the major U.S. overseas "creditors" reduced their holdings in April

Overall, looking beyond China, major overseas "creditors" in the United States actually chose to reduce their holdings in April.

Overall foreign investor holdings of U.S. Treasuries fell to $8.018 trillion in March from a revised $8.084 trillion in March.

Four of the top 10 U.S. overseas "creditors" – China, the Cayman Islands, France, and Switzerland – increased their holdings of U.S. bonds during the month, while the remaining six – Japan, the United Kingdom, Luxembourg, Canada, Belgium, and Ireland – reduced their holdings during the month.

Among them, Japan, the "largest overseas creditor of the United States", reduced its holdings of U.S. Treasury bonds by $37.5 billion in April, reducing its holdings to $1,150.3 billion. Market participants had been keeping an eye on Japan's U.S. bond holdings as Japan's monetary authorities intervened in late April to support the yen. On April 29, the yen briefly fell to a 34-year low of 160.24 against the US dollar.

The UK also reduced its holdings of US Treasuries by $17.9 billion in April to $710.2 billion, continuing to rank third in terms of holdings.

Other highlights from the TIC report:

The U.S. Treasury Department's International Capital Flows (TIC) report also showed that all foreign net inflows into U.S. long- and short-term securities and bank flows in April were $66.2 billion. Of this amount, net foreign private capital inflows were $44.2 billion and foreign official funds were $22 billion.

In April, foreign residents increased their holdings of long-term U.S. securities — net purchases of $159.4 billion. Among them, the net purchase of foreign private investors was $127.5 billion, while the net purchase of foreign official institutions was $31.9 billion. U.S. residents also increased their holdings of long-term foreign securities, with net purchases of $36.3 billion.

Taking into account both international and U.S. long-term securities, overseas net purchases of U.S. long-term securities amounted to $123.1 billion in April.

Foreign residents reduced their holdings of short-term U.S. Treasuries by $10 billion in April, and their holdings of U.S. dollar-denominated short-term U.S. securities and other custodial liabilities decreased by $1 billion. The U.S. banking system's own net liabilities to foreign residents in dollar denominations fell by $55.9 billion.

(Finance Associated Press Xiaoxiang)

View original image 548K

• 

•