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After Dumping 30% Of Its Treasury Holdings In Half A Year, Russia Warns It Will Continue Selling US Debt

Tyler Durden's picture




 

Just in time for the end of QE2, when the US needs every possible foreign buyer of US debt to step up to the plate, we get confirmation that yet another major foreign central bank has decided to not only not add to its US debt holdings, but to actively sell US Treasurys. The WSJ reports that "Russia will likely continue lowering its U.S. debt holdings as Washington struggles to contain a budget deficit and bolster a tepid economic recovery, a top aide to President Dmitry Medvedev said Saturday. "The share of our portfolio in U.S. instruments has gone down and probably will go down further," said Arkady Dvorkovich, chief economic aide to the president, told Dow Jones in an interview on the sidelines of the St. Petersburg International Economic Forum." Well, with Russia out, at least we have China and Japan continuing to buy US debt.... Oh wait, China is contemplating dumping two thirds of its debt you say? And the biggest buyer of Japanese bonds is now in the process of selling Japanese bonds in the open market for the first time (so not really in the market of US bonds). Well, surely US households will step up to the plate. After all they all have so much "cash on the sidelines" courtesy of the RecoveryTM ©® that they can't wait to dump it all into paper yielding less than 3% a year, and has negative real rates of return. Wait, what's that: according to the Fed, in Q1 US "households" sold $1.1 trillion annualized in Treasurys to the Fed? So, let's get this straight: China, Japan, and now very much openly Russia, the three countries with the largest financial reserves in the world, are threatening, if not already dumping US bonds, just in time for US households to sell their holdings of US paper to Brian Sack. And this is happening 2 weeks before QE2 ends... Um... Are we and Bill Gross (and certainly not Morgan Stanley) the only ones to see a problem with this?

More on the latest confirmation that the time of US superpower supremacy has ended...

Asked if U.S. debt was as solid an investment now as it was 10 years ago, Mr. Dvorkovich said: "On an absolute basis, yes. On a relative basis, compared to other investments, of course not."

"When we take decisions and compare, we're not thinking in absolute terms," he said.

Russia's financial reserves—which stood at $528 billion as of June 10—are the world's third largest, after China and Japan's. As of May, according to Russia's central bank, 47% of reserves were in dollars and 41% in euros, compared with 45.2% in dollars and 43.1% in euros on Jan. 1.

The central bank recently diversified the stash to include the Canadian dollar, which makes up 1% of the total, and plans to put 0.8% into the Australian dollar starting in September.

And next, presenting the monthly status update of the second cold war, which is now held entirely between central bank trading accounts. Russia has now cut 30% of its Treasury holdings in the past 7 months. When the caption above the blue thingy hits zero, the "Evil Empire" wins.

 

 

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Sat, 06/18/2011 - 17:03 | 1381007 Manthong
Manthong's picture

They were smart enough to establish a 13% flat tax a while ago. too.

Sat, 06/18/2011 - 17:10 | 1381018 ZeroPower
ZeroPower's picture

Russia doing everything possible to bring America to ruin. Nothing new here. 

Moscow is quite the story and an up and coming financial center for CEE, but the corruption prevalent there is a huge deterrent. Still prefer USD over the RUB - market sentiment compliments my thoughts.

Sat, 06/18/2011 - 17:23 | 1381045 lolmao500
lolmao500's picture

Russia is doing everything it can to bring America to ruin? Are you joking? I'll remind you that it's not illegal to sell worthless US treasuries.

If you want to know who's bringing America to ruin, look no further than Washington DC and their banking buddies on Wall Street.

Sat, 06/18/2011 - 18:12 | 1381169 ZeroPower
ZeroPower's picture

I suggest you look into world politics going more than, oh, 5 years. The cold war was just the tip of the iceberg. Russia wants to be a - no, the world power, and the USA is standing in its way. Pretty facetious that you didnt realize what i was alluding to, besides the mere financial aspect of holding a country's debt which is inevitable as the reserve currency (still) belongs to the USA.

Sat, 06/18/2011 - 18:58 | 1381258 Use of Weapons
Use of Weapons's picture

Hmm, right. You should be aware that the Russian road system is currently falling apart, and a major bitching issue - before 'taking over the world', I think 98% (including those with Mercs) want the pot-holes fixed. Srsly - do a poll, the person who fixes the roads will win an election.

You'll find that (many) Russians are attempting to create a stable, prosperous and modern nation out of the rubble of the ruble [1995/6 crash, eh?] and sort their shit out. Dreams of 'world domination', given the strategic weakness of Siberia aren't on the cards. Don't forget that oligarchs were created by your CIA (BIS?) dumping credit lines not into institutions, but into private pockets, which allowed mass concentration of wealth. The benefits of that compared to the deficits are debatable elsewhere.

However, when you see shit coming from Moscow, just remember who prevented nuke decommissioning and so on, and who is still attempting to have a monopoly on world money:

http://www.guardian.co.uk/world/2010/dec/08/wikileaks-us-russia-visa-mas...

 

p.s.

 

Those Rose Tinted Spectacles - LSD is a damaging thing.

Sun, 06/19/2011 - 00:20 | 1381849 sun tzu
sun tzu's picture

The Russian roads and infrastructure have always been horrible. That was their saving grace in WWII. Just because their people want nice roads instead of empire does not mean it will happen. Most Americans don't want an empire and constant war.

Is it possible that both the USA and Russia want world domination? I think so. Putin is no angel. 

The Russian oligarchs are former KGB and military. They aren't a bunch of tools and puppets easily controlled by the CIA. You give the CIA too much credit. They can influence third world rebels and despots in Syria, Cambodia, and Lybia. It's not so easy to push around hardened former KGB and Red Army officers.

Sun, 06/19/2011 - 11:45 | 1382474 Use of Weapons
Use of Weapons's picture

Yes, sorry - I'm aware of that; I should have added "indeed, the CIA (or whoever gave the slush funds) felt more comfortable with opposites they could understand (and had worked 'against' for many years), and in many ways, actually created a 'new' bi-polar situation to stave off redundancy. When this failed to materialise, the WoT and Islam rose to the challenge".

 

I was being literal & metaphorical - Russia needs to spend 5 - 10 years sorting out internal infrastructure / lifestyles / economy before "taking over the world" - they're well aware of the BRIC ascendancy, and are spending their natural energy resources wisely. Or should be. Likewise, nationally, there needs to be a new awakening and drive - and a big effort to stop the huge amounts of cheap afgan heroin being flooded into the country wouldn't hurt.

Sun, 06/19/2011 - 02:19 | 1381975 longontents
longontents's picture

THE world power?  Evidence for that assertion?

Sun, 06/19/2011 - 09:03 | 1382240 Urban Redneck
Urban Redneck's picture

Russia is doing everything it can to end USD hegemony in global trade and finance.

Russia is doing everything it can to to increase its national wealth influence over world affairs.

 

Then there is the whole ownership of the North Pole, and more importantly resource exploitation of the Arctic Circle and the wealth created thereby...

It's funny how people stop taking a nation as seriously when it defaults on its debt, as when Russia did a decade ago.  It also explains why certain States are murmuring that the US is already in default on its debt by devaluing its currency.  This chorus will get louder...

 

Sat, 06/18/2011 - 17:30 | 1381054 Coke and Hookers
Coke and Hookers's picture

Just because they don't want to lose 170 billion by lending it to a failed state doesn't mean they want to bring it to ruin. They are just thinking about themselves, as they should.

Maybe they are also deterred by the corruption in Washington and on Wall Street.

:-)

 

Sat, 06/18/2011 - 17:32 | 1381059 Sudden Debt
Sudden Debt's picture

Russia is just thinking about their own money.

What would you say if it was the other way around? You would be saying the US should sell it.

But now it's Russia that holds the cards, and it's very logical they will do this.

I would sell to.

Sat, 06/18/2011 - 17:35 | 1381064 dracos_ghost
dracos_ghost's picture

But Russia defaulted in '98 and now they are in the cat bird seat. They have a lot of balls criticizing anyone else's debt.

Maybe the US should just default like they did and get it over with.

 

Sat, 06/18/2011 - 17:44 | 1381094 Sudden Debt
Sudden Debt's picture

BINGO!!

AND SO SHOULD EUROPE!

THE SOONER THE BETTER!

Sun, 06/19/2011 - 02:59 | 1382001 dolly madison
dolly madison's picture

+1

Sun, 06/19/2011 - 18:25 | 1383133 Inibo E. Exibo
Inibo E. Exibo's picture

+ another

Sat, 06/18/2011 - 17:45 | 1381096 Coke and Hookers
Coke and Hookers's picture

If I remember correctly, Russia only defaulted on domestic debt, not foreign. And yes, the US should default now - while there are any assets left in the country that the Federal Reserve hasn't appropriated on behalf or their bankster masters.

Sat, 06/18/2011 - 17:47 | 1381106 karzai_luver
karzai_luver's picture

let that be a lesson to you.

 

why don't the :let the market clear: fools get this part.

default == clear.

 

 

Sat, 06/18/2011 - 18:03 | 1381117 Coke and Hookers
Coke and Hookers's picture

Ohh and I forgot to mention that the US is actually defaulting right now - by intentionally devaluing the dollar. From Russia's point of view, the devaluation is equivalent to the US Government stealing their money. Russia's point of view is the right point of view. The US is being run on stolen wealth now - stolen from foreign and domestic savers and future generations. The US is basically a giant Mafia now operating on shakedown money.

Sat, 06/18/2011 - 19:02 | 1381256 Bindar Dundat
Bindar Dundat's picture

Double BINGO!   get it over with for goodness sakes.

 

Sat, 06/18/2011 - 19:02 | 1381257 Bindar Dundat
Bindar Dundat's picture

Double BINGO!   get it over with for goodness sakes.

 

Sat, 06/18/2011 - 18:17 | 1381185 ZeroPower
ZeroPower's picture

I agree that the next few strategic moves belong to Russia - question is whether or not they will play them right. Who cares if Russia offloads a few $Bn of debt. The Chinese will just as quickly snatch that up. If not the Chinese, India. And etc etc.

The fact of the matter is, countries are slowly diversifying from having all-USD and all-EUR reserves into some other currencies which are slightly more attractive. The quagmire comes in the fact that no other currencies besides the main 4 (USD EUR JPY GBP) are anywhere near as liquid as required to be able to efficiently diversify a CBs holdings. And of the 4 mentioned, all are pretty much shit with their own set of problems. So, perhaps im leaning more and more towards the doomer's views here on how fiat will soon die - or perhaps im hoping for a miracle in the CHF CAD or AUD to step in and take a larger part in worldwide FX markets. I dont think the USD is ever going away, because if it was looking for a precedent (JPY or GBP) then we all know that has not happened before in similar circumstances. Also, w/r/t default, the US is not Argentina or Chile or Iceland, where, respectfully, those defaults had little to no impact on the overall scheme of world currency markets save a horrible borrowing rate for a few years as a form of slap on the wrist.

Sat, 06/18/2011 - 19:35 | 1381308 XPolemic
XPolemic's picture

perhaps im hoping for a miracle in the CHF CAD or AUD to step in and take a larger part in worldwide FX markets

I doubt it:

Swiss GDP: 492B

Canadian GDP: 1.3T

Aussie GDP: 1.1T

Those economies are just not big enough to take over USD or EUR and both CAD and AUD are commodity based economies.

CNY is issued by a communist state.

I would be leaning towards a currency basket or gold/silver or perhaps a combination of the two.

When it comes to economics: SIZE DOES MATTER.

 

Sat, 06/18/2011 - 19:52 | 1381322 ZeroPower
ZeroPower's picture

Yup, right on. I didnt feel like retyping from a post a few hours ago but exactly, it would take some major MAJOR event to increase those countries currencies to the liquidity necessary to be even considered a major currency in FX.

CNY however, as long as that dreaded peg can be removed in the near future (it was removed till CN got the financial crisis excuse in 08 to re-peg), might indeed be something interesting for future reserve status. 

Sun, 06/19/2011 - 07:19 | 1382164 XPolemic
XPolemic's picture

CNY however, as long as that dreaded peg can be removed in the near future (it was removed till CN got the financial crisis excuse in 08 to re-peg), might indeed be something interesting for future reserve status.

Problem is that the CN financial system is far too opaque, and even the central government is not really interested in the CNY becoming the world's reserve currency, they would rather someone else do that so they can buy bonds in that currency and send whoever has that currency cheap plastic toys and pretty much any other low end manufacture.

Talk of CNY becoming a reserve currency within China is just jingoist fluff to keep the extreme nationalists feeling happy.

As for 'pegs', doesn't the US Federal Reserve peg the USD when it sets the risk free rate?

 

Sun, 06/19/2011 - 05:35 | 1382096 Tom_333
Tom_333's picture

SDR maybe?

Sun, 06/19/2011 - 07:20 | 1382165 XPolemic
XPolemic's picture

Aren't they crossed against the USD?

 

Sat, 06/18/2011 - 22:38 | 1381340 Arius
Arius's picture

"Who cares if Russia offloads a few $Bn of debt."

Zeropower - listen to yourself...in one post you say russia is trying to bring down the US in the next post you say who cares about a few $Bn....which one is it?

get over it ... this is not about the world politics exactly (if that was the case why would russians buy the treasuries in the first place)...and most importantly, when you talk about trillions, russia really doesn't matter...

 

The take away message to me is that if Russians can see the end of the line thats not a good sign because they are not exactly the best in this business... or ever will be for that matter... so if even they are selling most likely there are not many left beyond to hold the bag...


Sun, 06/19/2011 - 08:41 | 1382224 Urban Redneck
Urban Redneck's picture

Russia was among the first (and the loudest) to jump ship on GSE debt when they were nationalized. 

Given that Bernanke needs buyers of US debt to avoid/delay QEnext- it doesn't bode well for Treasuries benefiting as much they previously have from being viewed as a safe haven parking lot.  So that only leaves required regulatory capital (both Basel III and D-F) to drive purchases among regulated FIs.  Then Bernanke has to either fire up the presses or watch a bond market implosion.   

Sat, 06/18/2011 - 18:43 | 1381223 ThoughtCriminal
ThoughtCriminal's picture

"Russia doing everything possible to bring America to ruin."

No worries, US "government" is doing a good job of this already. 

 

Sun, 06/19/2011 - 19:49 | 1383264 Savyindallas
Savyindallas's picture

How about 'The banksters are doing everything possible to bring America to ruin. Nothing new here."  if you have followed U.S./Russia since the end of the Cold war, you would know that even when Russia was acting in good faith, the U.S. and the International banksters who control the U.S.  -were doing everything to enslave and crush russia. Can you blame them if they respond in kind.  

Sat, 06/18/2011 - 17:12 | 1381024 gwar5
gwar5's picture

Won't be long before Timnanke remembers all the IRAs and 401ks just sitting around doing nothing. The public pension cookie jar is already being tapped, and nobody complained... so why not?

Wait. I know, how about the Social Security Trust Fund?  Oh... never mind....

Sat, 06/18/2011 - 17:20 | 1381030 Cdad
Cdad's picture

Nobody could see this coming.  No one...not a single bipedal humanoid could guess that Ben Bernanke's perversion of the bond market would cause real capital to refuse to participate.  Nope.  It has been an impossible conclusion to reach.

But I understand that Ben Bernanke is 100% positive that the Federal Reserve Bank could extract itself from all of this...in 15 minutes.  

Unfortunately, the 60 minutes reporter to which he said this did not bother to ask the logical follow up question of, "How?"

And now next week, we will be treated to all kinds of other such central bank revelations about Greece, Ireland, Portugal and the rest, as well as their pontifications about our own situation in the US via the FOMC.  Great!

Until such time as these criminal syndicate Wall Street banks are broken up [including the Fed], the Greater American Depression will continue...as real capital will not form under such idiotic and corrupt financial leadership as ours.

Sat, 06/18/2011 - 18:46 | 1381177 rufusbird
rufusbird's picture

"Unfortunately, the 60 minutes reporter to which he said this did not bother to ask the logical follow up question of, "How?" 

Prompts one to ask "Why didn't he ask the question?" doesn't it...?

I just figured out the answer to my own question. He did answer the question and either they both started laughing or the answer was so embarressing or lame that they edited it out...

Sun, 06/19/2011 - 00:32 | 1381868 sun tzu
sun tzu's picture

Journalists are fucking idiots and/or corrupt as politicians

Sun, 06/19/2011 - 03:24 | 1382023 rufusbird
rufusbird's picture

It also occured to me after my comment that the Ben is well know for not giving interviews. I am highly confident that he did not give the 60 Minutes interview without first obtaining a rights to review and omit. He was suppose to look good here. To most of the Mass media TV audiences he probably actually did come off well.

I watched a few videos last evening and just woke up troubled by them. This one illustrates why..."musicals..."

http://www.youtube.com/watch?v=WE2gp9R50ZM&feature=related

Sat, 06/18/2011 - 17:18 | 1381036 The Aviator
The Aviator's picture

We had better hurry up and spread the silver message to the masses before the collapse arrives and most of the US is left pennyless.
We all need to join the Silver Viral Project and take silver viral!

http://silverdoctors.blogspot.com/2011/06/silver-viral-project-guidebook...

Sat, 06/18/2011 - 17:33 | 1381060 Sudden Debt
Sudden Debt's picture

Everybody should cover his own ass. I don't even bother anymore.

 

Sat, 06/18/2011 - 17:38 | 1381077 mynhair
mynhair's picture

Always wondered who bought those assless jeans.  Thanks for clearing that up!

Sat, 06/18/2011 - 17:40 | 1381079 spinone
spinone's picture

+1. There's no cure for stupid.

Sun, 06/19/2011 - 05:57 | 1382107 richard in norway
richard in norway's picture

i thought it was phisical silver we needed

 

can you eat viral silver

Sat, 06/18/2011 - 17:25 | 1381051 Rodent Freikorps
Rodent Freikorps's picture
Population: 142,905,200 (2010 Russian Census) Growth rate: -0.06% (2010)

 

Zombie Russia

Sat, 06/18/2011 - 17:34 | 1381075 Sudden Debt
Sudden Debt's picture

Zombie Russia:

Has one of the largest Oil & Gas & Mineral deposits in the world.

I also has the most farmland in the world.

To bad for them he?

 

Sat, 06/18/2011 - 19:04 | 1381262 Use of Weapons
Use of Weapons's picture

It had a whole lot more rich loam before Chernobyl.

Sun, 06/19/2011 - 05:35 | 1382097 Tom_333
Tom_333's picture

Russia...(not the former Soviet Union) spans 11 timezones...large parts of western Siberia are not even propely explored.Chernobyl is a drop in the proverbial bucket.

Sat, 06/18/2011 - 20:33 | 1381402 Hulk
Hulk's picture

I remember a few years back when Putin had held fuck camps. Now I know why...

Sat, 06/18/2011 - 17:25 | 1381052 mynhair
mynhair's picture

Well, looks like King $ only has a minimum of 70% more to fall.

Very bullish for the pig Market.

Sat, 06/18/2011 - 17:27 | 1381055 Nolsgrad
Nolsgrad's picture

Meh, it's only 125Bln on 14Trln....

besides, The real worry should be have you studied up on those survival skills?

www.stalker-game.com

 

http://preview.tinyurl.com/6gpdj4b

Sat, 06/18/2011 - 17:28 | 1381058 blunderdog
blunderdog's picture

47% of reserves were in dollars and 41% in euros, compared with 45.2% in dollars and 43.1% in euros on Jan. 1

Doesn't this say Russia is shifting *more* money into dollars relative to Euros?

Or is this supposed to be a distinction between "dollars" as a cash option and treasury bonds.  (That seems really unlikely.)

Sat, 06/18/2011 - 17:35 | 1381067 Tyler Durden
Tyler Durden's picture

They are adding USD-denominated reserves and selling Treasurys.

Sat, 06/18/2011 - 18:00 | 1381149 blunderdog
blunderdog's picture

Nice.  Why then that could be downright BULLISH, by Jove!

Sat, 06/18/2011 - 18:43 | 1381227 Tyler Durden
Tyler Durden's picture

USD Reserves increase by default for any country that has a positive trade balance with the US. For an indication of where these USD denom reserves are going read this and this.

Sun, 06/19/2011 - 12:14 | 1382557 blunderdog
blunderdog's picture

They deserve more gold.  They defeated them evil Nazzies in WW11.

Sat, 06/18/2011 - 17:37 | 1381070 MarcusAurelius
MarcusAurelius's picture

It is all faith. Do you as a bond holder have faith in the US to pay its debt? I think it is safe to say that the government has already lost this public faith (if they really ever had it) and now the final straw is the central bank. Once people lose faith in that entity and it is coming, well......game over. Central banks all over the world have stimulated false demand and thus dooming all economies. What now?

Sat, 06/18/2011 - 17:34 | 1381073 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

This is the US Elites and Fed's plan. If all foreigners divest their holdings and the US gubbimint defaults with no foreigners holding the bag, what the hell are US citizens going to do? It is much easier to screw your own people than to constantly ask for handouts from other countries, see Japan.

Sat, 06/18/2011 - 17:36 | 1381080 GeneMarchbanks
GeneMarchbanks's picture

I'm gonna go ahead and call shananigans on that Canadian and Aussie $ "diversification". They are buying up real assets, whether they want us to know, is another issue. I'm not all that impressed with the Russians, they seem behind the curve in this game.

Sat, 06/18/2011 - 17:37 | 1381082 Sudden Debt
Sudden Debt's picture

and they are adding gold every year to their reserves.

When did the US did that last time?

 

Sat, 06/18/2011 - 18:43 | 1381226 CU1981
CU1981's picture

Any country with a printing press should be able to hoard/purchase untold amounts of GOLD.

 

It's a question I have yet to find an answer to. A missing link.

Sat, 06/18/2011 - 17:42 | 1381092 bob_dabolina
bob_dabolina's picture

I have an idea! 

Why don't we pass another 1 trillion dollar stimulus!?

If that doesn't work maybe we can find another industry to offer public subsidies for...if there aren't any industries left that aren't subsidized maybe we can create one with the soul purpose of subsidizing it.

It's been working so well to date.

Sat, 06/18/2011 - 17:56 | 1381139 Nolsgrad
Nolsgrad's picture

Anyone have a clue where on the Z.1 you find holders of US Debt broken down? ie housholds, countries, etc?

http://www.federalreserve.gov/releases/z1/current/z1r-3.pdf

 

 

Sat, 06/18/2011 - 18:45 | 1381229 Tyler Durden
Tyler Durden's picture

Section L. 209 (and that is the wrong link - here is the correct one).

Sat, 06/18/2011 - 22:30 | 1381681 kito
kito's picture

tyler, you cant really believe demand will dry up, i mean really..

Sat, 06/18/2011 - 18:01 | 1381143 Buck Johnson
Buck Johnson's picture

Your correct about next week information coming out about Greece and Portugal and other PIIGS.  The big issue is that we truly don't know how much Greece really owes and how much the banks have levereged with this debt.  You add it all up, if Greece defaults it would or could cost the ECB and the US banks over a trillion dollars and thats just Greece.  I don't know what they will do, but the US will do another QE3.

Sat, 06/18/2011 - 18:07 | 1381158 mynhair
mynhair's picture

Yes, QE3 will happen, but not be announced outside the chosen few.

Sat, 06/18/2011 - 18:38 | 1381214 silverisgold
silverisgold's picture

Buck you've nailed it -- almost. The real problem here is an AIG problem. It's all the CDO's hanging on that debt that is the threat. As with AIG, if the Greeks default, even partially, then the CDO's insuring that debt will become payable, and since the CDO's are leveraged (100-1?) there is no actual money to cover them.

Sun, 06/19/2011 - 06:04 | 1382111 richard in norway
richard in norway's picture

QE3 will be european printing

Sat, 06/18/2011 - 18:19 | 1381180 slewie the pi-rat
slewie the pi-rat's picture

Cold War (n) Dept:  And next, presenting the monthly status update of the second cold war, which is now held entirely between central bank trading accounts.

you know how competitive i think our banksters are!  maybe the rooskies sold the T's to help belarus?  like the chinese caring about greece?  like the US caring about whatever somebody else isn't taking care of caring about. 

i also like what the russian guy said at the end:   Asked if U.S. debt was as solid an investment now as it was 10 years ago, Mr. Dvorkovich said: "On an absolute basis, yes. On a relative basis, compared to other investments, of course not."

that "absolute basis, yes" = crock, in any language, unless he is a russian sarc.  then it becomes comic;  even a cut above the stale russian bankster stand-up.   

we get "news" from this accounting-type bullshit.  fiat counterfeiters' reporting bureau.  this helps us not see the curtain, behind which we must not l@@k.

Sat, 06/18/2011 - 18:32 | 1381206 Corn1945
Corn1945's picture

Is it really a surprise that people aren't lining up to buy instruments that yield less than the rate of inflation?

Sat, 06/18/2011 - 18:51 | 1381241 RobotTrader
RobotTrader's picture

Right now demand for Treasuries is simply voracious.

2-yr. yields now sitting at world record lows.

I'd say somebody big has been buying, and Bill "Drawbridge" Gross has puking up blood the last two months.

And any central bank that has been buying Treasuries the last 35-years, well over 98% of those buys are in a winning position.  Someone like Russia who is selling is simply rebalancing its portfolio, since the spectacular gains on the Treasury portfolio have blown past allocation targets.

Sat, 06/18/2011 - 19:00 | 1381253 ZeroPower
ZeroPower's picture

2yr going to 0. Curve steepeners FTW

Sat, 06/18/2011 - 21:00 | 1381461 Corn1945
Corn1945's picture

Right. And where do yields go once they hit zero?

This isn't a tough question. Either yields go up from zero or the dollar goes to zero. No one in there right mind is going to buy bonds that guarantee they will lose money when held to maturity. There are plenty of healthier economies out there that have interest rates above 0.

 

Sat, 06/18/2011 - 21:20 | 1381522 slewie the pi-rat
slewie the pi-rat's picture

no matter how high they bid them, there will always be a yield.  amazing!  at least a return of nominal bond value. 

but you are 100% correct, i think, corn_45, in that on a short enough time scale, you might not get your money back, even before inflation. 

and yet, it has already happened and may get to be near-normative, so that is when i say:  pay me 3% and i will borrow $1 mil!  even i will be loan worthy!   

bizarro, BiCheZ!

Sat, 06/18/2011 - 22:31 | 1381676 kito
kito's picture

robo, your truth is ruining the soap opera!!!!

Sun, 06/19/2011 - 17:02 | 1383014 fswalker
fswalker's picture

+1

Sat, 06/18/2011 - 19:17 | 1381269 sitenine
sitenine's picture

The Bernank is transparent, which is bad for any central bank.  He's given his hand with shite press conferences and speeches.  In his first press conference, he deferred all fiscal policy questions to the elf at Treasury, saying only that the Fed supports a strong dollar.  In a recent speech to the New America Foundation and Committee for a Responsible Federal Budget (yes, I see the irony), he said, "Failing to raise the debt ceiling in a timely way would be self-defeating if the objective is to chart a course toward a better fiscal situation for our nation."

http://c-span.org/Events/Bernanke-Administration-and-Lawmakers-Look-at-D...

Houston, we have a problem.  Raising the debt ceiling will be meaningless if we aren't able to borrow what we need without raising rates in the VERY near future - Treasury is already looting federal pension plans FFS, and the Fed cannot roll over enough maturing debt to make much of a difference except to manipulate the yield curve.  Raising the rates to where demand will meet the need is economic suicide, as it will create deflation the likes of which even God has never seen.  The dollar, as the de facto reserve currency, makes little or no sense under these circumstances.

This situation creates problems that we are all painfully aware of, but have we thought of all the potential consequences?  Nation building for instance, relys heavily on the infusion of USD that are worth something.  Just something to think about as the Arab Spring rolls into summer...


Sun, 06/19/2011 - 05:37 | 1382099 Tom_333
Tom_333's picture

The U.S. is a big country. There´s a lot to rob.401 K´s and...soon

Sat, 06/18/2011 - 19:13 | 1381279 monopoly
monopoly's picture

It just continue to amaze me how few have any clue as to what is coming down. The big cities are hopping. Apple busy, Nordstrom's, restaurants. So many think this is all going to be ok soon. I just do not get it.

And how do the citizens of Europe allow their govts. to bail out defunct countries on the backs of Their citizens who have done nothing wrong and work hard. They should be indicting Merkel for betraying her people. You incur more debt and taxes so I can retire at 57 with free medical care on the Aegean Sea. What kind of a mentality do these good people have?

Sat, 06/18/2011 - 19:27 | 1381297 James T. Kirk
James T. Kirk's picture

I've seen a lot of strange shit in the universe, but nothing compares to this.  I have not yet seen ANYTHING to account for the simple math disparity here.  Our 3 biggest creditors are dumping our debt, the Fed is allegedly not going to buy any more debt, the FedGov continues to spend 75-100% more a month than it takes in tax receipts, and yet the financial markets have not yet collectively gone psycho.  I am rapidly forming the opinion that behind the scenes, the Fed-Treasury-Illuminati is doing what ever they want, and are simply not telling us.  I mean, how hard is it to create a few trillion binary digits as needed?   Why do we even LISTEN to these assholes? 

Sat, 06/18/2011 - 19:40 | 1381309 lizzy36
lizzy36's picture

My friend what you have just described is "MORAL HAZARD".

What financial players in the US have learned over the last 3 years, is there are no bad outcomes for them.

Financial Markets have become accustomed to being bailed out at every juncture. So the players are just anticipating another bailout. Tyler has always speculated that the time will come when the entity providing all the bailouts would need a bailout and then what?

 

Sat, 06/18/2011 - 19:51 | 1381326 Cman5000
Cman5000's picture

It's not anti American to dump treasury holdings. When you think about it why would you want to have any thing to do with 350 million American dead beats. The world can ride this storm out it will be ruff but it's a sinking ship. It's been a great ride but it's coming to an end ...

Sat, 06/18/2011 - 20:04 | 1381333 slewie the pi-rat
slewie the pi-rat's picture

@ Captain Kirk:  i know, skipper!  simple hydraulics would indicate that if you push this shit outa one sewer, you push it into another.  speaking of which, did you see where those european-based primary dealer banksters ended up with a shitload of T's? 

Sat, 06/18/2011 - 20:09 | 1381351 dust to dust
dust to dust's picture

 Who says Votka isn't brain food? Seven time zones me thinks. 

Sat, 06/18/2011 - 20:14 | 1381354 dust to dust
dust to dust's picture

 Who says Votka isn't brain food? Seven time zones me thinks. 

Sat, 06/18/2011 - 20:18 | 1381364 Cman5000
Cman5000's picture

No i didn't see where them Ts went ? As far as Europe...I have family in Europe they hate the euro they want it gone prices have gone up on everthing their tired of paying for everyone's else's shit they hate foreigners... I think what's going on here is 1930s all over again it's like it's the lead up to world war-2 again but this time world war-3. History repeats itself but this time with Nukes.You don't have to be a smart guy or gal to see the world is spinning out of control '' Forecast is for "bad craziness".

Sat, 06/18/2011 - 20:49 | 1381451 ViewfromUnderth...
ViewfromUndertheBridge's picture

I took most of 2009 off and travelled to see for myself...in central Europe a guy running his camping/climbing shop I visited a lot would talk to me about the financial crash...he was haunted by the violence in Yugoslavia as it broke up in the 90s...I still see his face, it was very apparent that some part of him just knew that sort of violence will be coming as a consequence of this.

There are animosities...this thing ain't over, it is just beginning. 

Sat, 06/18/2011 - 20:21 | 1381369 buzzsaw99
buzzsaw99's picture

whatever. t-bond yields have only one direction to go, down.

Sat, 06/18/2011 - 20:32 | 1381410 sitenine
sitenine's picture

whatever. t-bond yields have only one direction to go, down.

Interesting.  You are implying strong demand.  From whom please, if I may so kindly inquire?

Sun, 06/19/2011 - 09:06 | 1382242 swissinv
swissinv's picture

only short-dated treasuries - OT2

Sun, 06/19/2011 - 22:27 | 1383605 buzzsaw99
buzzsaw99's picture

sitenine, did you read this?: http://theautomaticearth.blogspot.com/2011/06/june-18-2011-monetary-psy-...

it responds to some of the zh group-speak on bonds. There is always the potential for another world stock market scare. Whether it is orderly or bonds crash first then stocks the result of the mass exodus is the same. Even with the 10y at 2.5% Gross wouldn’t be sitting on the sidelines with hundreds of billions in cash if there was another nominal wall street recession. Then there are foreign buyers who could flee from euro/emerging assets and jump into bonds whether the market is rigged or not if the panic was real enough. The euro-banks who benefitted from QE2 (ref. ae link) still need safe income. Junk bonds, corporate bonds, and emerging market bonds could weaken, causing a flight to safety. So many people here at zh don’t seem to grasp that everything is being supported by fed policy, not just t-bonds, t-bonds is the tool they use. Without the fed debauching the currency with tons of free (yet borrowed) cash PMs, junk bonds, corporate stocks and bonds, everything collapses in a heap. Look at what happened after Lehman. Where do you think the money came from to drive rates on the 10y below 2%? None of that money has been destroyed, much of it should have been, but it wasn’t. QE3 is always a possibility. My logic goes like this, the larger the fedgub debt becomes the lower rate they will be willing to pay. That’s it. I don’t know how they will do it, many short term tricks are available. There are corporate reserves abroad that could be repatriated at some point. If the owners of the fed ever decide to defend the usa currency rates won't have to rise to attract capital. Longer term of course we're all doomed.

Mon, 06/20/2011 - 01:00 | 1384012 sitenine
sitenine's picture

I understand your position, and I respect it.

Might I suggest though that the next flight to safety may not be into USD?

Just a thought.

Sat, 06/18/2011 - 20:59 | 1381469 Corn1945
Corn1945's picture

Count me out. I'm not buying a bond that pays less than the rate of inflation.

Sat, 06/18/2011 - 20:32 | 1381399 luckylogger
luckylogger's picture

What a f%$#&& joke, what else will everybody buy? Is not USD 75% of the currency in the world? you either buy treasurys or you wipe your ass with it. You guys need to look a little closer into how money actually works befor thinking this is a big deal. Somebody has to buy those treasurys it is just the way the ledger works. I do believe there are more US treasurys outstanding than there are stocks and commodities in the entire world.So what are you going to do with your money that you get from selling oil to the us?

Sat, 06/18/2011 - 21:17 | 1381513 ViewfromUnderth...
ViewfromUndertheBridge's picture

Hard assets, hookers & blow. Next question?

Sun, 06/19/2011 - 19:06 | 1383180 Savyindallas
Savyindallas's picture

Maybe they won't sell oil to the U.S.   -maybe the Russians and Chinese and malaysians will start buying that oil.

Sat, 06/18/2011 - 21:01 | 1381474 dxj
dxj's picture

$125B  out of 14T ... oooooh ... shock and awe.

Sat, 06/18/2011 - 21:20 | 1381523 ViewfromUnderth...
ViewfromUndertheBridge's picture

I don't think you are paying attention...

$900bln... less $600bln (June 30)... less $125bln.. pretty soon you are talking real money.

Sat, 06/18/2011 - 21:24 | 1381509 swissinv
swissinv's picture

I buy some inflation protected treasury bonds with a China sponsered CDS attached (Credit Inflation Protected Treasury Bond©)

Sat, 06/18/2011 - 21:22 | 1381524 dperson
dperson's picture

Russia sold billions of FNMA and Freddie Mac GSE debt during 2008, pushing yields to insane levels. Now they trade nearly flat to treasuries. Going into Gold Bitchez on a relative value basis would jive with the article, although they could have done better by getting par on their debt (or at least waiting for the debt to be g'teed and scream tighter) then they could have bought even more gold in early 2009...unless they had their own currency crisis to contend with....

http://www.ft.com/intl/cms/s/0/e8637ef4-0d3e-11df-af79-00144feabdc0.html#axzz1PdWwYG3c

So Russia, China, the Fed, B Gross, and Japan have either been selling treasuries or not buying and we are sitting at 2.92%. Imagine....

 

 

Sun, 06/19/2011 - 03:26 | 1382021 chancee
chancee's picture

Love Trademarked Recovery.  All time.

Sun, 06/19/2011 - 06:19 | 1382117 banana.republic.us
banana.republic.us's picture

Not buying US debt is an act of war.

Sun, 06/19/2011 - 07:36 | 1382176 DavidC
DavidC's picture

I don't know what the problem is, and why all the discussion over Russia selling the US Treasuries.

We in the UK, as the fourth largest holder of US Treasuries, will continue to take up the slack, as we have been buying more.

Oh, wait...the UK is insolvent as well?

Oh dear.

DavidC

Sun, 06/19/2011 - 08:00 | 1382196 DrunkenMonkey
DrunkenMonkey's picture

Whilst oil is priced at its current level, Russia can do what it likes, up to and including the invasion of another of its neighbours.

Sun, 06/19/2011 - 14:32 | 1382781 PulauHantu29
PulauHantu29's picture

Well, Russia joins the many who now are moving out of Treasuries into more substantial assets like silver, gold, copper, etc. Even JPM and Goldman Sachs have bought massive warehouses to store millions of tons of hard assets such as copper and aluminum I read here on ZH.

But I am not worried about T's since The Bernank said he will buy (directly or indirectly via other banks) the T's to keep our country running. He really has no other choice due to the massive deficit and continued gov payouts (and bailouts).

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