This China Chart Will Be All Over The Place Today -- But Don't Let It Scare You

From ZeroHedge, a look at Chinese holdings of US Treasuries…

china treasuries

Photo: ZeroHedge

The upshot you’re supposed to takeaway is that the long-awaited dump is on!

There’s just a few problems:

  • The size of the selling is tiny. It doesn’t look like it, but since the bottom of the Y-axis it $1.06 trillion, you can see that the selling amounts to barely anything.
  • Last year we saw a similar dip from October through March. Then it went higher again. There are obviously some cycles here.
  • China’s Treasury holdings aren’t dictated by mere whims about what the country does or doesn’t think about the health of US Treasuries. The huge stockpile if a function of the Chinese trade surplus with the US, and the need to recycle that surplus into something, and obviously Treasuries are the only real instrument up to the task.
  • There’s no connection between undulations in Chinese holdings and US Treasury yields, so you don’t have to worry about borrowing costs spiking if Chinese Treasury holdings go down.
  • China is globalizing, doing big business in more and more countries: Naturally it will want to re-arrange its portfolio of reserves in a way that reflects the changing world.

So anyway, don’t worry about it. Everything’s cool.

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