Is China selling off its US Treasury and dollar bonds? It's complicated.

A deep analysis of China's US dollar reserve holdings reveals that their total reserves are basically unchanged over the past 10 years.

However, China regulators are moving reserves from US custodians to European ones, and are increasing their purchases of Agencies, such as Fannie Mae and Freddie Mac.

The change in custodial arrangements has profound implications for China's political risk management. What's more, it enables their SAFE officials to obscure their central banking operations abroad.

Their investment shift from Treasury paper to Agencies means they will be picking up extra interest income totaling hundreds of millions of dollars annually. Surprisingly, risk profiles for these assets are falling, despite aggressive Federal Reserve tightening.

Sources and links:
Reserve holdings changes
https://markets.businessinsider.com/n...

China isn't shifting out of dollars, or dollar bonds
https://www.cfr.org/blog/china-isnt-s...

Agency bonds definitions and applications for investors
https://www.schwab.com/learn/story/us...

China's rising holdings of US Agency bonds
https://www.cfr.org/blog/chinas-risin...

Fact sheets, Federal National Mortgage Association loans https://yourhome.fanniemae.com/buy/yo...

Biggest bailout in history FNMA and Freddie https://financialservices.house.gov/n...

Lead headline, "Where have all the foreign buyers gone for US Treasury Debt?"--Wall Street Journal
https://www.wsj.com/finance/investing...

Charting the fastest interest rate hikes
https://www.visualcapitalist.com/inte...

Current 30 year mortgage rates
https://www.statista.com/chart/27413/...

Record lows for mortgage delinquency
https://newslink.mba.org/mba-newslink...