Around a year ago, Dan and I put up an animation of the major foreign holders of Treasury securities from 2002 to 2009 at my other blog, Computational Legal Studies. At the time, the conversation was driven by China surpassing Japan as the largest foreign holder.
Since then, there’s been quite a bit of speculation as to when the Federal Reserve would surpass these largest foreign holders. The Fed has been acquiring these securities through its various Open Market Operations (OMO). However, I think focusing on just this Fed-vs.-China benchmark may be a bit misleading.
The animation below shows the proportion of Treasury securities held by the Federal Reserve, Japan, China, and all other foreign holders of Treasury securities between 2004 and 2010. The Federal Reserve holdings are based on the second column of the Fed’s latest H.4.1 and are current up to October 21st. The Treasury’s TIC data (historical here) is significantly lagged, however, and only current as of the end of August. Therefore, I’ve held the values constant from August for foreign holders, though the Fed’s slice does change based on real data.
I’ll let the video mostly speak for itself, but note that the increase in the Fed’s holdings are relatively dwarfed by the increase in total foreign holdings.
N.B.: It’s HD, make sure the watch the video in fullscreen!