China and India are reducing their holdings of U.S. bonds, while the European Union, Britain, Japan, and South Korea are increasing their holdings

According to the information released by the U.S. Treasury Department, as of February this year, the balance of U.S. Treasury bonds held by foreign investors in the United States expanded to $7,965.4 billion, a net increase of $20 billion or 0.25% compared with $7,945.4 billion last month.

Japan, South Korea, the United Kingdom, and the European Union are all increasing their holdings

In terms of countries and regions, Japan is still the country with the largest amount of U.S. debt outside the United States, with $1,167.9 billion as of February this year, an increase of $16.4 billion from the previous month. The amount of U.S. debt held by the United Kingdom expanded to $700.8 billion from $691.2 billion last month, an increase of $9.6 billion.

In February this year, Luxembourg's holdings of U.S. bonds expanded to $379 billion, Belgium's holdings of U.S. bonds increased sharply to $320 billion, France's holdings of U.S. bonds increased to $284 billion, and South Korea's holdings of U.S. bonds increased to $119.2 billion.

In addition, Germany increased its holdings by 600 million US dollars, and the balance of US bonds held rose to 90.8 billion. In contrast, the balance of U.S. debt held by the mainland shrank to $775 billion, a decrease of $22.7 billion from the previous month. India's holdings of U.S. debt fell to $234.7 billion, while Brazil's holdings of U.S. debt fell to $225.6 billion.

Then there is Saudi Arabia, once the backbone of the petrodollar, whose current holdings of U.S. debt have fallen to $130.5 billion. In other words, it is mainly the European Union, the United Kingdom, Japan, South Korea, and other US allies who are actively snapping up US bonds and feeding the US economy.

In terms of overall volume, foreign investors in the United States only "increased their holdings by $20 billion" in February this year, which is not very high. But China, India, Brazil, Saudi Arabia and other countries are reducing their holdings, excluding these declines, the actual amount of US allies will be much higher.

Now the United States is harvesting allies

Lu Qiyuan, a well-known economist, recently said that it is now difficult for the United States to harvest China, and although some other large developing countries cannot completely avoid being harvested, they also know the strength of US hegemony. I am also preparing some things to try to avoid being harvested.

By the end of 2023, the United States has attracted a record amount of $54.31 trillion in foreign capital. Capital continues to flow to the United States, whether it is safe-haven capital, comprador capital, bureaucratic capital, or other types of capital, as long as it flows to the United States, it can maintain its hegemony.

And it needs a sustained flow of capital to the United States in order to maintain hegemony. Since it is difficult for large countries, including China and Russia, to harvest capital, and many small developing economies have little capital to harvest, the United States can only turn its attention to Europe, Japan, South Korea and other allies.

It should be noted that the increase in holdings of US allies is the real increase in holdings

Nansheng mentioned in several previous popular science articles that China's "increase in U.S. bonds for several months" at the end of last year was not due to the mainland's active purchase of U.S. bonds, but due to the passive increase in holdings brought about by the decline in U.S. bond interest rates. It's like an increase in the amount of money caused by the rise in the price of a stock.

It's not that we're buying stocks again. Some netizens who read this may not understand, Nansheng will explain it simply, that is, the total amount of bonds held is inversely proportional to the rise and fall of bond interest rates, and the amount of bonds held will decrease when bond interest rates rise (as shown in the figure above).

When the interest rate on bonds falls, the amount of bonds held increases. In the months at the end of last year, U.S. bond rates fell month by month, causing the amount of U.S. bonds held by the mainland to rise. At that time, Nansheng pointed out that the mainland was due to the passive increase in interest rates, not active purchases.

He also wrote an article predicting that the mainland's holdings of U.S. bonds will fall in January and February this year. This is not because the mainland is actively selling US bonds, but because US bond interest rates have risen. The U.S. bonds held by the mainland were bought a few years ago, and they will lose money if they are sold against the backdrop of high interest rates.

At present, the core strategy of the mainland to hold U.S. bonds is "after maturity, it can not buy a large amount of it". In February, U.S. Treasury interest rates continued to rise, which means that the balance of U.S. bonds held by China, India, Brazil and other countries will fall. Remember, interest rates and prices are inversely related.

If US allies such as the European Union, the United Kingdom, Japan, and South Korea hold the same strategy as the mainland, their holdings of US debt in February should also be reduced – that is, passively reduced. But on the contrary, they are all growing, which is an active increase in holdings.

As an example, when the stock price falls, the capital held by someone goes up. The only explanation can only be that he took the initiative to buy a lot of shares when the stock fell. Finally, I would like to remind everyone that netizens who don't understand can search for Nansheng's popular science article, titled "After increasing its holdings of U.S. bonds for two consecutive months, why did the mainland reduce its holdings of U.S. bonds in January? This article is written by Nansheng, and reprinting and plagiarism are strictly prohibited!