As we move through the back half of trading in July, China is dumping US bonds for the 3rd straight month but look at what hedge funds are doing.

July 19 (King World News) – Here is what Peter Boockvar wrote as the world awaits the next round of monetary madness:  Foreigners were back buying US notes and bonds with net purchases of $46.4b in May. The buyer makeup though was bifurcated as central banks were sellers again while private participants were big buyers. Specifically with notes and bonds, Asian countries were net sellers while Europe and the Caribbean (aka, hedge funds) were buyers…


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For the 3rd straight month China was a seller of notes and bonds of $9.2b but offset that with purchases of t-bills which brought their net purchases to $10b. Hong Kong, a possible conduit for mainland selling, sold $8.7b of notes and bonds. Japan sold $3.3b of notes and bonds but offset that with t-bill purchases. Participants in the Cayman Islands, a hedge fund conduit, were buyers of $34.8b of notes and bonds and thus dominated the buying out of that region.

King World News – It is important to note that U.S. Treasury and bond transactions out of the Caribbean (hedge funds) were larger than that of China. At some point this may lead lead to some major volatility in the these markets as the we move through the rest of 2017.  As KWN has pointed out many times, the bulk of derivatives are held in the interest rate markets.  King World News will keep an eye on these key markets to look for signs of instability.

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