Illustration: Aïda Amer/Axios

Foreign private buyers continue to pile onto U.S. government debt while foreign governments again pulled money out, led by China.

What it means: The U.S. Treasury International Capital Report showed a net inflow of $78.2 billion — $134.2 billion of foreign private inflows and net foreign official outflows of $56 billion.

  • Chinese government holdings of U.S. Treasury bonds fell for the sixth straight month in December, dropping by $19.3 billion.

Why it matters: Market analysts say the decline in foreign government holdings of Treasury bonds and the increase of issuance due to steadily rising U.S. budget deficits may be a prime factor in market stress, including issues in the structurally important repo market that banks use to get fast cash.

The big picture: For 2019, private buying netted to $197.6 billion, while official government purchases declined by $332.2 billion, BMO Capital Markets said in a recent note.

  • There has been "a more pervasive theme" of reserve managers cutting back their Treasury buying as the government has issued more debt, and foreign officials' holdings have been little moved since 2014 despite an increase of around $5 trillion in debt.
  • That gap has largely been filled by the Fed's recently restarted bond buying program and private foreign sources.

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