Treasury holdings of the Fed, China and Japan compared

Following is the most recent data detailing the overall Treasury holdings of the US Federal Reserve compared to those of China and Japan. Treasury data is current through this week while China and Japan data is of November 2010.

The data is presented in a format showing the total amounts only. If you would like to see the actual progression of the Fed's increase, please click here:

http://traderdannorcini.blogspot.com/2011/02/federal-reserve-system-balances.html

which will take you to a post I prepared a few days ago showing the build over a period of time.

While there is not an exact correlation between the Fed's Custodial Holdings and the TIC report, the two are close enough that we can use the former to get a decent gauge of where the latter is heading. Note the chart below which is a graph of the total amount of Treasuries that the Fed is holding in custody for foreign Central Banks.

At the start of November of last year, the total amount of Treasuries held in custody was $2.59 trillion. As of today, that number is being reported as $2.62 trillion or an increase of $30 billion.

We know that the Fed has been engaging in the purchase of Treasuries related to the QE2 program since that time frame. Over the same period, the Fed's reported holdings of Treasuries has increased a whopping $319.5 billion or more than TEN TIMES the amount of other foreign Central Banks.

Mr. Bernanke likes to state that the Fed is not monetizing the debt because that would be a permanent situation and according to him, QE is only temporary. My view is that if it quacks like a duck and acts like a duck and looks like a duck, it is a duck. While there may indeed be a semantic difference, the effect is still the same as far as I am concerned. The Fed is seemingly becoming the biggest buyer of Treasuries on the planet.