On Tuesday, June 18th local time, the US Treasury Department released its International Capital Flow Report (TIC) for April 2024. The report shows that the size of US treasury bond bonds held by foreign investors in April fell back from the record high in March. However, it is slightly surprising that China slightly increased its holdings of US treasury bond bonds that month, which is the first increase in the size of China's holdings of US treasury bonds since this year.
The report shows that China's holdings of US treasury bond in April increased by US $3.3 billion to US $770.7 billion. This is also the smallest change in China's US Treasury holdings (whether increasing or decreasing) in at least a year.
Since April 2022, China's US Treasury holdings have been consistently below $1 trillion. After reducing its holdings in March, China's US Treasury holdings fell below the low of $769.6 billion in October last year, further reaching a new low since March 2009.
And this time, although China slightly increased its holdings of US bonds in April, the cumulative reduction scale within the year is still as high as 45.6 billion US dollars, and it is difficult to say that the overall trend of reduction has changed.
From the trend of US bonds, the price of US treasury bond bonds weakened significantly in April - the yield of US bonds opposite to the price rose all the way, because the report at that time showed that US inflation was still stubbornly higher than the Federal Reserve's target of 2%, and a series of economic data remained strong, which led to investors' expectations of the Federal Reserve's interest rate cut within the year cooling.
In the same month, the yield of benchmark 10-year US bonds finally soared from 4.194% to 4.612%, while the yield of two-year US treasury bond bonds rose from 4.603% to 5.046%.
Interestingly, previously released data showed that the pace of China's central bank's gold purchases in April actually slowed down. According to data released by the People's Bank of China last month, as of the end of April 2024, China's central bank's gold reserves were reported at 72.8 million ounces, an increase of 60000 ounces (1.7 tons) compared to the previous month, the lowest increase since November 2022.
The pace of China's central bank's increase in gold holdings has slowed down, and the momentum of reducing US Treasury holdings has temporarily come to a halt, both occurring in April. Is this a coincidence or a temporary respite after a large amount of buying and selling in the early stages? Investors may want to pay attention to more data and observe it in the future.
Most major US overseas creditors reduced their holdings in April
Overall, looking beyond China, major overseas creditors of the United States actually chose to reduce their holdings more in April.
In March, the total amount of US treasury bond bonds held by foreign investors fell to US $8.018 trillion from the revised US $8.084 trillion in March.
Among the top ten foreign creditors of the United States, four - China, the Cayman Islands, France, and Switzerland - increased their holdings of US bonds in the current month, while the remaining six - Japan, the United Kingdom, Luxembourg, Canada, Belgium, and Ireland - decreased their holdings in the same month.
Among them, Japan, the "largest overseas creditor of the United States", reduced its holdings of US treasury bond bonds by US $37.5 billion in April, reducing its holdings to US $1150.3 billion. Market participants have previously been paying attention to Japan's holdings of US bonds, as the Japanese monetary authorities intervened in foreign exchange at the end of April to support the yen exchange rate. On April 29th, the Japanese yen fell to a 34 year low of 160.24 against the US dollar.
In April, the UK also reduced its holdings of US treasury bond by US $17.9 billion to US $710.2 billion, and its holdings continued to rank third.
Other highlights of the TIC report
The International Capital Flow Report (TIC) released by the US Treasury Department also shows that in April, the net inflow of all foreign countries into US long-term and short-term securities and bank statements was $66.2 billion. Among them, the net inflow of foreign private funds was 44.2 billion US dollars, and the net inflow of foreign official funds was 22 billion US dollars.
In April, foreign residents increased their holdings of long-term securities in the United States - with a net purchase of $159.4 billion. The net buying amount of foreign private investors was $127.5 billion, while the net buying amount of foreign official institutions was $31.9 billion. US residents have also increased their holdings of long-term foreign securities, with a net purchase amount of $36.3 billion.
If both international and US long-term securities are taken into account, the net purchase of US long-term securities overseas in April was $123.1 billion.
In April, foreign residents reduced their holdings of US short-term treasury bond bonds by US $10 billion, and their holdings of US dollar denominated short-term US securities and other custody liabilities decreased by US $1 billion. The US banking system's own net debt denominated in US dollars to foreign residents decreased by $55.9 billion.