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Mad Hedge Fund Trader

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John Thomas, The Mad Hedge Fund Trader is one of today's most successful Hedge Fund Managers and a 40 year veteran of the financial markets.…

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Its Official: China is Unloading its Treasury Bonds

It looks like the smart money these days is found in China. While American investors have been scrambling over each other to buy more Treasury bonds at historically low yields, China has begun quietly unloading some of its own enormous holdings. In June, the Middle Kingdom sold $21.2 billion of  paper, reducing its net long to $839.7 billion. This is little more than 10% of the total $8.18 trillion in federal debt that Uncle Sam has outstanding.

Total foreign ownership of US Treasury bonds amounts to $4 trillion, up from $2.4 trillion in three years.  Instead, the Chinese have been buying Japanese government bonds, which today carry a paltry 0.9% yield, but have the merit that they are denominated in a rapidly appreciating currency. The Mandarins in Beijing have also been picking up a variety of bonds in Europe which have seen yields pushed to near records, thanks to the debt crisis there.

Officials at the People's Bank of China say that it is all part of a broader diversification effort away from the greenback. PIMCO's Bill Gross has apparently been taking Mandarin lessons on the sly because he has also been paring back his own massive holdings in longer dated Treasuries. To understand why, take a look at the chart below of the spread between the Dow dividend yield and the ten year Treasury yield which has turned positive for the first time since 1955.

US Treasuries owned by China

Foreign country ownership of Treasuries

dividend yield

Courtesy: Mad Hedge Fund Trader




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Leave a comment
  • Anonymous on August 27 2010 said:
    I've been unloading them too. Gold, silver, food, guns, ammo, etc. All these paper 'investments' are BS.
  • Anonymous on August 29 2010 said:
    YO JR if y'all is so radicalwhy are you following the sheeple? It's time to move to the t'other side and buy basic comodities of oil, copper, coal and agriculture logistics. You'll be happy you did 'cause y'all will have money in your pocket and the ammo won't run out in my world of brains over fear.
  • Anonymous on September 01 2010 said:
    Sorry, Aceman. You don't actually own anything real unless you can hold it. You own more paper. Jr actually owns and holds his belongings and if the world gets ugly, or he just becomes unemployed, JR will be just fine.GOT FARM?

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