This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Fed Surpasses China in Treasury Binge

NEW YORK ( TheStreet) -- Data released by the Treasury Department on Wednesday morning indicated that with the Fed's $972 billion in Treasury holdings it has surpassed China's $906 billion in Treasury securities. And with more QE2 purchases on the horizon, the Fed lead over China in the U.S. paper race is likely to be extended.

The Treasury data on China's total Treasury holding exposure is on a two-month lagging basis, as of October 2010. China has been selling longer-term bonds and focusing on shorter-term issues recently, a trend that was evident in the October numbers also.

As for Japan, even as its total exposure to Treasury securities increased in October to its highest level in a year -- and China remained the largest foreign holder of Treasury paper -- Japan was close to overtaking China for second place, while the Fed pulled away from both.

Market analysts and economists were saying that the most recent Treasury buying data showed less enthusiasm from foreign participants for the U.S. government paper, especially the longer-term bonds.

For months, Fed hawks have been expecting the Fed versus China event to occur, given the rapacious buying of government securities that has become synonymous with Fed policy. Still, if it was a fait accompli for the Fed to overtake China as the king of treasury holdings, it's in the least another notable moment in the long-running debate over whether the Fed's actions are leading the U.S. down a path of inflation and speculative asset bubbles.

"I'm not one of those people worried about China holding too much debt or the Fed exceeding an arbitrary benchmark, but the data shows how big the Fed has become in this market, and the market distortions that Fed buying is causing," said Nicole Gelinas, a scholar at the Manhattan Institute and one of the signers of a recent high-profile open letter sent to the Fed by think tank e21 that criticized its monetary policy.

The Manhattan Institute scholar said the real concern should be a Fed monetary policy that is hiding the truth of a financial system that is still broken. "It's not just Treasury securities but mortgage securities and everything that the Fed is buying," Gelinas said.
1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $94.02 -2.67%
FB $104.07 -5.81%
GOOG $683.57 -3.45%
TSLA $162.60 -7.26%
YHOO $27.97 -4.05%


Chart of I:DJI
DOW 16,204.97 -211.61 -1.29%
S&P 500 1,880.05 -35.40 -1.85%
NASDAQ 4,363.1440 -146.4150 -3.25%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs