China and Japan Trim Their Treasury Purchases

When Japan surpassed China as the biggest foreign holder of U.S. Treasuries in February, plenty of chatter arose in financial circles about the development. But it was really much ado about nothing.

Although China reemerged as No. 1 in March, it matters little who stands on top, analysts say. The real issue is that, as the two countries step away from intervening in theforeign exchange marketto depress their currencies, both are reducing their Treasury purchases — and in China’s case actually selling a bit.

China’s Treasury portfolio slid 1 percent to $1.261 billion in March from $1.272 billion a year earlier, while Japan’s rose just 2 percent to $1.227 billion from $1.2 billion.

As for the question of which country holds more, “it’s like one of those videos at Yankee stadium that show [fake] races between different subway lines,” says Robert Sinche, a global strategist at Amherst Pierpont Securities, a New York fixed-income broker-dealer.

How did Japan edge ahead of China in February? Apparently, a portion of China’s Treasury holdings had been temporarily warehoused in Belgium in that month, and they were officially counted as part of that country’s monthly account, says Shyam Rajan, a U.S. rate strategist at Bank of America Merrill Lynch. Those Treasuries were then probably moved to the New York Federal Reserve in March and are now correctly attributed to China. In any case, the value of Chinese Treasury holdings has gradually been falling over the past year, while the growth of Japan’s holdings has slowed.

在此之前，中国的财政部持有人已经安装了几年，因为它的央行建立了美元储备，以降低人民币的实力。随后中国用那些美元购买国债。中国现在有必要抑制元。“它看起来像资本流入中国至少放慢了，如果没有逆转，”Sinche说。“介入的需要已经消退，所以一般来说他们正在购买更少的国库。”

Japan’s Treasury purchases had accelerated over the past three and a half years, as the Bank of Japan (BOJ) similarly intervened to depress the yen and use the dollar proceeds to buy U.S. government debt. Now the yen’s weakness against the dollar — it’s near an eight-year low — makes it unnecessary for the BOJ to buy more dollars.

Looking atforeign central banks总的来说，Sinche说，“全球金融体系更加平衡，所以你不需要货币干预，你不需要国债。”

Meanwhile, U.S. debt issuance has dropped, with the budget deficit narrowing to $483 billion in the fiscal year ended September 30, 2014, from $1.4 trillion in 2009. “We need them [Chinese and Japanese Treasury purchases] less, and that’s why the numbers aren’t growing so much,” Rajan says.

在中国中央银行大部分Treasury buying; in Japan, despite intervention by the BOJ, it’s largely the private sector — insurance funds, pension funds and banks.

“From the late 1990s until the financial crisis, there was a notion that the U.S. was beholden to foreign purchases of Treasuries — that China and Japan had us by the throat,” says David Gilmore, a partner at currency research firm Foreign Exchange Analytics in Essex, Connecticut. “If they threatened not to buy Treasuries, it would be lights-out for the market and funding the government deficit.” But that wasn’t true then and is even less so now, Gilmore notes.

分析师预计中国和日本的趋势将使较小的国库购买继续。Sinche说，美元已经获得了力量，并将进一步升值，因为联邦储备更接近提高利率。喂椅子珍妮特Yellen于5月22日表明，今年晚些时候可能会增加.

“We’ll have less investment from foreign central banks, who tend to buy and hold, and the Treasury market will be much more impacted by private investors, who tend to shift positions much more rapidly,” Sinche says.

To be sure, he and others don’t foresee a significant drop in Chinese or Japanese holdings. “Given that the world is awash with sketchy debtors, one can see why Chinese investors would look to U.S. Treasuries as a haven,” Gilmore says.

And Japanese investors continue to prefer Treasuries over European government bonds because of their attractive yield spreads, Rajan notes. The ten-year Treasury note yields 2.15 percent, compared with 0.54 percent for ten-year German government bonds.