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America, Meet Your Brand New Largest Foreign Creditor

Exactly one month ago we wrote that "Japan Ties China As America's Largest Creditor" when, according to Treasury International Capital in the month of January, China sold just over $5 billion in Treasurys while Japan bought $8 billion in US paper. Fast forward to today when we are pleased to announce that, as expected, the trend has continued and for the first time since the great financial crisis, Japan is once again America's largest foreign creditor with total holdings of $1224.4 billion, surpassing China, with $1223.7 billion, for the first time since just around the time Lehman filed for bankruptcy.


 

Curiously, how the two countries flipped the top position is not what one would expect, because neither actually added to their Treasury holdings, instead Japan sold $14.2 billion while China sold $15.4 billion. In fact, this was the biggest one month sale by China since December 2013 and Japan's largest since June of 2013.

However, how they got there is irrelevant, as now Japan can boast that not only is it monetizing over 100% of its net domestic treasury issuance, but it is also the largest foreign creditor of the United States.

Indicatively, even the two largest creditors combined hold less Treasurys than the Federal Reserve which in the week ended April 8, held a total of $2.46 trillion in US debt.

 

And should US 10 year paper continue to yield such a "massive" spread over comparable Japanese paper, one can be confident that Japan's buying of America's debt will only continue.

The bigger question is now that China is clearly slowly but surely dumping its US Treasury holdings, just what is the government buying. The government, that is, not the population: those we already know are engaged in the biggest scramble for Chinese stocks in nearly a decade.

Source: TIC