This Is Really Happening: China Is Buying Less US Debt

China appears to finally be buying less U.S. government issued debt, according to Standard Chartered (via FT Alphaville).

Even considering the fact that China doesn’t buy U.S. treasuries through their own market, but rather through others like the UK, it looks as if they’re shifting their asset purchases from U.S. debt to other instruments denominated in currencies like the euro.

From Standard Chartered (via FT Alphaville):

But here comes the sting. Over the last few months, a large disparity has emerged between China’s new FX reserve accumulation (our estimates are based on official FX reserve numbers, adjusted for portfolio valuation effects) and total net purchases of US Treasuries and T-bills by buyers in China, London and Hong Kong. We track these three groups of purchases together to get around the problem outlined above. To eliminate some of the month-to-month volatility, we have calculated three-month rolling sums. As Chart 1 shows, the gap is new and large.

Alphaville’s Tracy Alloway says Standard Chartered suspect it’s European assets they are buying.

Note the gap Standard Chartered cite:

Chart

Photo: Standard Chartered

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