Econ Watch - Foreign holdings of US government bonds rise to a record high in December
- International investors increased holdings of US government bonds by USD78.0bil (or +1.4% MoM), which pushed foreign holdings to a record level of USD5.79tril in December.

- Foreign holdings of US government bonds mainly came from Belgium (+28.0% MoM), UK (+13.0%), Hong Kong (+12.1%), Norway (+18.1%), South Korea (+16.2%), Denmark (+15.1%) and Netherlands (+23.4%).

- Meanwhile, China reduced holdings of US Treasury debt in December by the most in two years as the Federal Reserve announced plans to slow asset purchases.

- China’s holdings of US government bonds fell by USD47.8bil (or -3.6% MoM) to USD1.27tril in December. Nevertheless, China’s holdings have increased by 4.0% YoY in 2013.

- In terms of forex reserves, note that China has accumulated a world record of USD3.82tril (or +15.4% YTD) in December. Despite that, the CNY currency had strengthened by 2.8% against the USD in 2013.

- Capital inflows and the central bank’s intervention to limit gains of the CNY currency have contributed to China’s currency constituting one-third of global forex reserves holdings.

- Also, Japan’s holdings of US government bonds slipped by USD3.9bil (or -0.3% MoM) to USD1.18tril. In 2013, Japan’s holdings grew by 6.4% YoY. Note that Japan is the second largest foreign lender to the US.

- As for Malaysia, US treasury holdings in December were unchanged from November. However, it fell by 38.9% YoY (or -USD7.5bil) to USD11.8bil at end-2013.

- Elsewhere, overall reserves at BNM declined by 1.3% MoM (or -USD1.9bil) to USD133.1bil as at 30 Jan 2014. BNM will release the international reserves for Malaysia as at mid-Feb on 21 Feb 2014.

- During the 1H of February, Malaysia’s international reserves had probably depleted by another USD2.0bil from end- Jan as BNM sold USD and bought the Ringgit to limit the depreciation of the local currency.

- In the US, the Fed trimmed its USD85bil monthly bond buying by USD10bil in January and again in February. That pace of QE tapering will continue until the central bank ends the program at end-2014.