STORY CONTINUES BELOW THESE SALTWIRE VIDEOSBy Jamie McGeever
The Japanese and Chinese central banks' combined footprint in the world's largest, deepest and most liquid government bond market is now its lowest on record, at least since comparable data began being collected in the late 1990s. To be sure, Japan and China are still forces to be reckoned with. They are by some distance the world's top two holders of U.S. bonds, and China's stash is probably significantly larger when state banks, wealth funds and suspected holdings in third-party countries like Belgium and Britain are factored in.
"No foreign central bank owns the bond market, so to speak. The market is basically driven by a set of bets on the Fed, not flows from any one country these days," said Brad Setser, senior fellow at the Council of Foreign Relations.Japan and China were both buyers of Treasuries in June, the last month of available data. Valuation-adjusted data from Fed economists Carol Bertaut and Ruth Judson show that China and Japan added $8 billion and $6 billion to their respective stashes.
This ties in with official sector holdings of U.S. Treasuries parked with the Fed, which are up around $100 billion this year.
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