Source: Caixin.

On Tuesday (June 18) local time, the US Treasury Department released the International Capital Flow Report (TIC) for April 2024. The report showed that the scale of US Treasury bonds held by foreign investors fell slightly from the record high in March. However, it was slightly surprising that China increased its shareholding of US Treasury bonds in that month, marking the first increase in China's holdings of US Treasuries this year.

The report shows that China's holdings of US Treasury bonds increased by $3.3 billion in April to $770.7 billion. This is also the smallest change (whether increase or decrease) in China's holdings of US Treasuries in at least a year.

Since April 2022, China's holdings of US Treasuries have been consistently below US$1 trillion. After reducing its holdings in March, the scale of China's holdings of US Treasuries fell below last year's October low of US$769.6 billion, setting a new low since March 2009. However, although China increased its holding of US Treasuries slightly in April, the total amount sold this year is still as high as US$45.6 billion. It remains to be seen whether the overall trend of the sell-off has changed or not.

However, although China increased its holding of US Treasuries slightly in April, the total amount sold this year is still as high as US$45.6 billion. It remains to be seen whether the overall trend of the sell-off has changed or not.

Looking at the trend of US Treasuries, the prices of US Treasuries weakened significantly in April, and the yield of US Treasuries, which moved in the opposite direction of prices, continued to rise during that time. This was due to reports at the time showing that stubbornly high US inflation exceeded the 2% target set by the Federal Reserve, and a series of strong economic data cooled expectations that the Federal Reserve would cut interest rates this year. In the same month, the benchmark 10-year US Treasury bond yield surged from 4.194% to 4.612%, while the two-year US Treasury bond yield rose from 4.603% to 5.046%.

Interestingly, previously released data showed that the pace of China's gold purchases actually slowed in April. According to data released by the Chinese central bank last month, as of the end of April 2024, China's central bank held 72.8 million ounces of gold, a month-on-month increase of 60,000 ounces (1.7 tons), marking the lowest increase rate since November 2022.

The pace of China's central bank's gold purchases slowing down, as well as the temporary halt in the trend of selling US Treasuries, both occurred in April. Is this a coincidence or a temporary pause after a large amount of buying and selling operations? Investors may want to pay attention to more data for observation.

Overall, looking beyond China, major US overseas "bondholders" sold more US Treasuries in April.

According to the report, the net inflows of all foreign long and short-term securities and bank flows to the US in April were US$66.2 billion. Among them, foreign private funds had a net inflow of US$44.2 billion, and foreign official funds had a net inflow of US$22 billion.

Overall, looking beyond China, major US overseas "bondholders" sold more US Treasuries in April.

In March, the scale of US Treasuries held by foreign investors overall decreased from the revised $8.084 trillion in March to $8.018 trillion.

Among the top ten US overseas "bondholders", four - China, the Cayman Islands, France and Switzerland - increased their holdings of US Treasuries in that month, while the other six - Japan, the UK, Luxembourg, Canada, Belgium and Ireland - sold them.

Among them, Japan, the "largest US overseas bondholder," sold $37.5 billion of US Treasury bonds in April, reducing its holdings to $1.1503 trillion. Market participants have been paying attention to Japan's holdings of US Treasuries, because the Japanese monetary authorities intervened in the foreign exchange market at the end of April to support the yen exchange rate. On April 29, the USD/JPY exchange rate once fell to a 34-year low of 160.24.

In April, the UK also sold $17.9 billion of US Treasury bonds, reducing its holdings to $710.2 billion, continuing to rank third in terms of holdings.

In addition, the TIC report released by the US Treasury Department also showed that the net inflow of all foreign long-term and short-term securities and bank flows to the US in April was $66.2 billion. Among them, foreign private funds had a net inflow of $44.2 billion, and foreign official funds had a net inflow of $22 billion.

In April, foreign residents increased their holdings of US long-term securities, with a net purchase of $159.4 billion. Of these, net purchases by foreign private investors were $127.5 billion, while net purchases by foreign official institutions were $31.9 billion. US residents also increased their holdings of long-term foreign securities, with a net purchase of $36.3 billion.

If both international and US long-term securities are considered, the net purchase of US long-term securities by overseas investors in April was $123.1 billion.

In April, foreign residents increased their holdings of US long-term securities, with a net purchase of $159.4 billion. Of these, net purchases by foreign private investors were $127.5 billion, while net purchases by foreign official institutions were $31.9 billion. US residents also increased their holdings of long-term foreign securities, with a net purchase of $36.3 billion. If both international and US long-term securities are considered, the net purchase of US long-term securities by overseas investors in April was $123.1 billion.

Foreign residents reduced their holdings of US short-term Treasury bonds by $10 billion in April, while holdings of US dollar-denominated short-term securities and other custodial liabilities held by foreign residents decreased by $1 billion. The US banking system's net liabilities denominated in US dollars to foreign residents decreased by $55.9 billion.

Editor/tolk