Fascinating piece from Tyler Durden. Here's the beginning of his article on ZeroHedge. Click through for the rest and the graphs:
"When one thinks US Treasurys, and demand thereof, two entities pop into mind: the Federal Reserve, which over the past 3 years has been the biggest institutional buyer of US paper, and China, which is the largest foreign holder of US TSYs. Yet over the past year something curious happened: when it comes to setting marginal demand for US Treasurys, it was neither the Fed, whose sterilized Operation Twist has kept its holdings of US Tsys relatively flat, nor China, which has actually been a major seller of US paper, that has been the dominant source of marginal demand for Uncle Sam's never to be repaid obligations. Japan.
"That's right, as the chart below shows using TIC data, even as China was quietly selling its paper (and that accounts for UK holdings, aka Chinese offshore operations) in the beginning of the year, taking its total from over $1.3 trillion to $1.15 trillion in December, where it has stayed without moving at all in 2012 as China entered a buyer's strike mode, it was Japan who quickly stepped in to fill the void. And what a void it has filled. According to TIC data, Japanese holdings of US paper have soared from $882 billion in June 2011 to a whopping $1119 billion a year later. In the process the spread between Chinese and Japanese holdings of US TSYs has collapsed from $430 billion to a tiny $43 billion and at this rate Japan will overtake China as the top foreign holder of US paper within 3-4 months! ..."
Via Hal, Robert Blumen