By the end of 2010 China held nearly $1 trillion in US Treasuries--making it the #1 holder of Treasury securities. Suddenly, in early 2011, China has relinquished its title to another entity. Japan? Brazil? Saudi Arabia?
Nope. The Federal Reserve.
The Fed now owns over $1 trillion in Treasuries. Since it began its QE2 program back in October, the Fed has been buying on average $5-10 billion per day via it Permanent Open Market Operations (POMO) program.
Make sure you understand the process at work here. The US Treasury sells Treasury debt. Banks buys the Treasuries using funds borrowed from the Fed. The Fed buys the Treasuries from the banks with money printed out of thin air.
Also make sure you ponder the consequences of this program in lieu of our current market context.
position in TLT
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