Who are These "Foreign Investors" and Why Do They Love Treasurys So Much?
Strap on that tin foil hat nice and tight, kids, this feels like one hell of a marketing campaign.
Private foreign investors bought a net $87 billion in Treasury notes and bonds in November, after buying $23.7 billion the previous month. Including international and regional organizations, that figure hit a record high of $87.1 billion, up from $23.9 billion in October.
Meanwhile, foreign official institutions such as central banks bought a net $31.2 billion of these Treasurys, compared with net purchases of $15.0 billion the month before.
Net foreign purchases of debt issued by U.S. government-sponsored agencies like Fannie Mae and Freddie Mac totaled $5.9 billion, compared with $5.4 billion in sales in October.
For U.S. equities, net foreign purchases totaled $9.7 billion in November, compared with purchases of $10.3 billion the previous month.
For corporate bonds, net foreign sales were $4.6 billion, versus sales totaling $844 million the previous month.
China, according to the November data, held on to its title as the largest holder of U.S. Treasury securities. China's holdings totaled $790 billion, down from $799 billion the month before.
Noting that China has been a net seller of U.S. assets for four straight months, Win Thin, senior currency strategist at Brown Brothers Harriman & Co., said he doesn't think foreign governments are dumping U.S. securities on a sustained basis, but that the trend is worth watching.
Japan, the second-largest official holder of U.S. Treasurys, increased its holdings to $757 billion from $746 billion, while the U.K.'s holdings rose to $278 billion from $230 billion.
Anyone remember the United States' mysterious 5th largest creditor? Here's a quick refresher in case it's slipped your mind.
The fifth largest holder of US debt is a group entitled "Caribbean Banking Centers" that supposedly encompasses Bahamas, Bermuda, Cayman Islands, Netherlands Antilles, Panama, and the British Virgin Islands. With about $189 billion in T-bills, this is no small amount of "faith" in the credit of the United States. Even stranger, this vague little group increased their holdings by about $80 billion in the period between June 2008 and June 2009.
Perhaps UBS can weigh in on the dangers of off-shore banking? Just sayin.
Shall I strap on my tin foil hat? Certainly I am not the only one who has wondered just who these Carribean bankers are.
In 2005, North Dakota Senator Kent Conrad wondered the same thing (to his Senate colleagues):Well, increasingly we are going into debt with other countries around the world. We owe Japan over $680 billion. We owe China over $240 billion. We owe the United Kingdom over $140 billion. My favorite is the Caribbean banking centers.
We owe the Caribbean banking centers over $100 billion. I like to ask audiences back home if anyone is doing business with the Caribbean banking centers. I have never had a hand go up. I do not know where the Caribbean banking centers get their money, but we owe them $108 billion
I will save the truly wild speculation and say only "we saw what you did there" to whomever might read this and have sins to confess. Mind you, these "Carribean banking centers" likely hold more in US debt than they output in terms of GDP. I don't have time to crunch those numbers and will leave that particular rabbit hole to someone who doesn't have a day job, mmkay?
I refuse to believe this unless Japan really is that dumb.