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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: jrhana who wrote (20759)10/26/2004 5:24:52 PM
From: russwinter  Read Replies (1) of 110194
 
Notice OPEC IS NOT recycling petrodollars. "Foreign" (would mostly be CBs) holdings of UST up $212 billion in last six months, pretty much the whole fiscal deficit. $184.4 billion from just four sources (the coalition of the willing?): Japan 107.4 B, Caribbean (hedge funds and criminal enterprises), 30.8 B, UK 27.7 B, China 18.5 B.

Source CI's 10/26 issue:
Country Current UST Holdings ($billions) Mo/Mo August Change ($billions) Holdings As % Of Total Marketable UST's Holdings Six Months Ago ($billions)

Japan $721.9 $26.1 18.8% $614.5
China 172.3 5.4 4.5 153.8
UK 134.8 4.4 3.5 107
Caribbean 91.3 0.2 2.4 60.5
Korea 63.4 1.9 1.7 57.0
Taiwan 56.4 (1.2) 1.5 55.7
Hong Kong 49.4 (1.0) 1.3 53.1
Switzerland 48.9 0.8 1.3 48.2
Germany 48.3 (0.7) 1.3 46.0
OPEC 43.1 (0.8) 1.1 41.0
Mexico 35.6 1.5 0.9 28.5
Canada 33.1 (0.2) 0.9 28.3
Luxembourg 26.4 0.4 0.7 27.7
Singapore 26.0 (0.1) 0.7 25.7
Ireland 21.7 3.5 0.6 15.7
Turkey 16.4 1.4 0.4 14.2
Brazil 16.2 0 0.4 11.3
Italy 14.8 (0.9) 0.4 14.9
Thailand 14.8 1.0 0.4 15.3
Belgium 14.1 (0.2) 0.4 12.9
India 14.0 (0.9) 0.4 13.3
Israel 12.5 (1.1) 0.3 14.1
France 10.2 (1.7) 0.3 12.3
Sweden 10.1 0.4 0.3 10.6
Spain 9.2 (1.2) 0.2 9.7
Netherlands 7.3 (7.3) 0.2 12.6
Australia 6.6 (0.9) 0.2 12.6
Other 120.8 (2.5) 3.1 111.3

TOTAL $1,839.6 $26.3 49.7% $1627.8

CI's comment:

Japan by far has been the key buyer of US financial assets. In the table above of foreign UST purchases for August, on a net basis Japan accounted for all UST buying in August. Something to keep in mind is that, as you know, Japan needs to import all of its energy requirements. And for now, those energy requirements are paid for in dollars when it comes to crude. The longer the Japanese attempt to hold down the Yen relative to the dollar, implicitly the higher their energy bill. A rising Yen would help blunt their energy costs in a big way. Although we're far from intimately knowledgeable about Japanese energy procurement practices, we understand that Japan does a significant amount of forward buying each year. And we all know what has happened to crude prices over the last twelve months. Japan faces a crossroads ahead. Continue buying US financial assets en masse to hold down the Yen against the dollar and watch their forward energy bill soar? Or allow the Yen to appreciate in order to blunt the costs of imported energy to a country that has no internal supply? Which is it going to be? Could this be the tipping point in terms of Japanese capital flowing into US markets? As always, we'll be monitoring Japanese capital flows closely as we move ahead.
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