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TIC: The most important report you've never heard of

Is China dumping US debt a red flag?
Is China dumping US debt a red flag?

The monthly Treasury International Capital report is one of those data pieces that usually means little to the typical investor. That's about to change.

More commonly called the TIC report, it's basically a summary of all the cross-border flows of money in government securities. The latest report was scheduled for release Friday at 4 p.m. ET. Unless you're a trader in those markets, the numbers don't really matter much.

However, China has made them matter.

After years of helping prop up U.S. debt through more than $1 trillion in purchases, China has begun to cut back on its holdings. This is particularly important as the national debt has exceeded $18 trillion, more than $13 trillion of which is held by the public.

Moreover, the U.S. bond market has long been considered the most liquid in the world and a reliable safe haven to park money in times of distress. Concerns have grown in recent months, however, that conditions could be changing and a crisis could be in the offing wherein a huge influx of sellers would come into the market without a commensurate level of buyers.

Deutsche Bank analyst George Saravelos recently referred to the condition as "quantitative tightening," a reversal in the quantitative easing that the U.S. Federal Reserve and other global central banks have used to keep markets liquid. The Fed had been buying billions of U.S. debt each month in a series of QE cycles that took its balance sheet past $4.5 trillion, but ended the program in October 2014.

Read MoreChina's 'QT' is the real global economic threat

Now, others are exiting the Treasury market as well.

The most recent TIC report showed that foreign holdings of U.S. debt had declined to $6.08 trillion, a 2.3 percent slip since January. More glaring, though, has been where the drop has come from.

Here's where it gets tricky: China's holdings actually have increased slightly since January, edging up to $1.24 trillion, keeping its position as the top holder of U.S. debt and ahead of Japan's $1.19 trillion. However, you have to slide down the report a bit to find the real story.

China is widely considered to be funneling its Treasury activity through Belgium, and the holdings reflected for that country have dropped substantially. It now holds just $155 billion, down about 56 percent from the beginning of the year.

The ramifications for the maneuvering are up for dispute.

Read More What China selling US Treasurys really means

Some believe the Treasury shedding is being done mainly to prop up the yuan, the Chinese currency, after the Chinese government devalued in mid-August.

However, the greater fear is that it could be part of a longer-term move that would destabilize the U.S. debt picture and send yields surging. Fortunately for a country like the U.S. that is only weeks away from once again breaching its debt ceiling, yields have held in and tightening financial conditions have yet to bite.