Second Biggest Weekly Drop Ever In Treasurys Held In The Fed's Custodial Account As Foreigners Dump

Tyler Durden's picture

There was one truly interesting observation in this week's Fed balance sheet update: not that the actual balance sheet hit a new all time record (which it did at $2.779 trillion), or that the Fed added another $24 billion in Treasurys to its balance sheet, or that total reserves hit a new all time record, increasing by $53 billion to $1.59 trillion. No. The biggest surprise was that in the just ended week, Treasury securities held in custodial accounts at the Fed, considered by some the best real-time representation of foreign holdings of US Treasurys considering that the TIC update is not only wildly inaccurate in its monthly update, but is also 3 months delayed, dropped by the largest amount in 4 years. From a total of $2.704 trillion, USTs held in custodial accounts declined by $18.7 billion to $2.685 billion. This is the second largest decline in history, only topped by the $22.1 billion in the week of August 15, 2007 which is the week that followed the great quant crash of 2007 that wiped out, among others, Goldman Alpha. This observation is in stark contrast to the recent record strength of bond issuance, after both the 5 and 7 Years auctions posted record Bid to Cover investor interest.

One explanation is that while foreign investors are aggressively buying up the belly of the curve, they are even more aggressively selling the other parts of the curve, namely both the short (sub 2 Year) and the Long (10-30 Year). Another explanation is that the weekly change in Custodial data is largely noise and has no bearing on total foreign holdings of debt, which however we would largely discount. Another question is whether the large outflow from bonds is a consequences to recent market volatility, or is the basis for one: i.e., will the money be used to purchase stocks, or, if as China is posturing, is this merely capital leaving the US and entering Europe. Lastly, the nearly $20 billion in USDs likely will have to be converted to another FX denomination: should any notably USD weakness be observed in the next several days, this could well be a reason.

A chart of total Custodial Treasury holdings:

And old faithful: the neverending weekly "record" Fed balance sheet chart:

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Long-John-Silver's picture

Beans, Bullets, and Bullion Bitchez!

DoChenRollingBearing's picture

+++++ Michael Victory!

I will find a way to put the Debt Clock into my own blog, BRAVO!

Completely agree with the sentiment to prepare...  In case the SHTF and then we have our TEOTWAWKI...  Discussed at my blog too.

I wish I were better prepared, but I am working on it.

Transformer's picture

What is TEOTWAWKI?

 

Never mind.

Larry Darrell's picture

We really like our acronyms around here..........even the really long ones

TEOTWAWKI = The End Of The World As We Know It

 

 

Sakka's picture

Gold, Guns, Gas, Grains; check out AAOOBFoods.com for the best long term food storage options on the web, imho.

camaro68ss's picture

booz, bitches, and rope swings

JW n FL's picture

http://www.youtube.com/watch?v=fkuOAY-S6OY

 

I got a silver dollar for every scalp and "W" sticker ya bring me!

 

Just kidding!

 

I wonder if my silver and gold is worth more than the paper market says???

 

"O" thats right! I already know that answer!

DoChenRollingBearing's picture

JW and other friends of the Bearing are welcome to email me at gmail to get a link to my new blog. I have gotten some knocks for putting out the word here at ZH, but I now have gold price widgets and putting in music, etc. to make my readers have a better experience (all self learned). Drop the 55 yr old bearing buyer a line and prove who you are and that you will be nice (= not spread my name or link here at ZH). I make ZH-ers go through this because of the secretive nature of ZH and the trolls found here within.  23 ZH-ers (so far) can't be wrong!

DoChenRollingBearing's picture

24 have so far.  My name at gmail, not rocket science.  If you do not get through, I will look you up and you can try again.

Janice's picture

Sausage, Smith & Wesson and Silver Slutz!

bigelkhorn's picture

Anyone notice some real weird action in bonds over the last few weeks. Hmmmmm. 

Below is a video for those people who like trading on the market.

=> http://www.youtube.com/watch?v=pPlY12-hQLw

This video cracked me up LOL.  FUNNY CHIT... LOL. 

breezer1's picture

yahoo is looking for spammers.

Weisbrot's picture

could be Japanese industrialists re-pating some funds for repairs & rebuilds

could be some MENA folks doing the same

or perhaps its just some player selling in to a dollar rally

since I dont get invited to the G8 or similar manipulation parties I dont know

do you....................... ?

 

Yen Cross's picture

  I'm fixated with that treasury intermix.

wombats's picture

What is the significance of this?

Yen Cross's picture

Metals, Bonds, Equities!

Popo's picture

The significance is that we're fucked.   But the more interesting question is:  How will we be fucked?

Will rates be forced up?  

Or will the solution be buy more of our own shit, and compound the problem?

The problem, from an investment standpoint is that each of those two outcomes is possible.  And each require different, opposing strategies to defend oneself.

We live in interesting times.   Or at least, we will very shortly.

 

 

tired1's picture

I watch 'experts' on Fox, CNBC and other shows where they warn that if the US doesn't mend its' ways that China will no longer buy bonds. No one mentions the Fed's actions. I mean: why doesn't Cavuto (whom I generally like) pick up on this crap?

dark pools of soros's picture

I'll post this one more time (since the first time was on a loony thread) just to see if it sparks any other ideas.  screw End the Fed.. let's Trick the Fed

 

-
How about fooling the FED and its private banks to keep taking on more and more of America's debt as China, etc gets out of the picture and then when the FED nearly has all of it and thinks it is time to show its leverage, we force a 20 cents on the dollar haircut to eliminate it all?

Then coin new money and give the FED et all a 1/1000 exchange rate of their fiat to the new currency to spite the fuckers...

As long as a side deal with the BRICs is in place we can watch Europe go into hyperinflation flames with all the western central bankers and still be able to have decent price oil since the military would still continue and not be confronted by the Eastern powers...

How else to get out of the grip?

-

Fedophile's picture

Brilliant.

Too bad it will never happen without revolution.

JW n FL's picture

Thats not true.. look at Kennedy! he killed the FED and the FED Debt and moved us to a Silver Standard!

 

"O" thats right! someone shot him from behind and made him move forward backward and side to side.. from behind.. with a heavy weight .308 (6.5) custom round.. physics was never my strong suit.. but thats seems funny to me.

 

Kinda like those perfect demo buildings.. I must be crazy.. me and 1,000 plus engineers!

tired1's picture

"When the Devil eats you there's only one way out." - Russian saying

Weisbrot's picture

 

are you suggesting that we nationalize the fed and erase the digital debt?

 

 

augie's picture

In the off chance you are not being sarcastic, I offer this estimation. Cavuto and anyone else on TV who wants to remain employed learns to refrain from speaking out against their masters. If you have any suspicion, as i assume you do by the nature of your question, that the sacred "fox" (news corp), CNBC (GE), CNN (time warner?) has interests in suppressing the truth, I would advise listening to that suspicion and follow it to its conclusion. 

 

 

tired1's picture

I was being honest. I most also conclude that even at my age (mid fifties) I am far more nieve than I suspected. I've been on ZH for a while now and it's given me a greater perspective. All this left vs right, convervative vs liberal, east vs west - mostly crap. There may be valid disputes between groups, but it seems clear that the power of control over the flow of debt will forever keeps the flames of war burning. Following the money trail has made many pieces of history fall into place.

Well, thanks for another dose of reality.

augie's picture

If only i could express the hope and joy i feel when I read posts like this. Recognition of truth is awe inspring. I wish you a safe and pleasant memorial day.

DoChenRollingBearing's picture

Yeah, I hear you at 55 too.  Bush had 6 years of R control in Congress.  I've had enough too.

That's why I enlisted as a Space Cadet in the Tinfoil Hat Brigade 2 - 3 weeks ago.  I could no longer take the lies (the straw was hiding the evidence of killing bin Laden).

Can any of my Superiors here give me any suggestions as to which batallion to join?  Things look pretty disorganized around here in the THB!  I am considering the below two:

-- The Space Batallion (looks fun)

-- The Lunatic Fringe Batallion (also promising)

I will put up an article soon at my new blog (now w/ widgets) re the Tinfoil Hat Brigade.  Want to see it?  Contact me, either by thinking how to do it (hint: look around this thread or just mail me at gmail dot com).

vote_libertarian_party's picture

I here yu brother.  It kills me when these TV financial experts say "...with China buying x amount of Treasuries..."

 

HEEEELLLOOOO....China stopped buying last fall.  It is 100% pure Fed heroin now dudes.

tired1's picture

How can one track the possesion of bonds. As far as I can tell there's a clearing house in NYC but I don't know how the info is distributed. What caught my attention was the Japanese arrested at the Italion border a few years back with billions in Fed paper. Didn't make sense back then but it does now. Actually, if I try to think like a real sleazeball scumbag - it all starts to make sense.

breezer1's picture

didn't the fed experts say the treasuries were counterfit?  rrrrriiight.

Transformer's picture

Yeah, like where do they get off on saying that?  Even that stupid video from the National Inflation Association has in it on the day the dollar died that the big announcement is that China quit buying.  I'm no expert.  I only know what I can gleen from these bloggers on the net.  China aint buying T's.  that OLD news.

 

Yen Cross's picture

 Beat it! you know nothing about trend lines or trading!!!!!!!!!!!!!! Liberal Clown!

buzzsaw99's picture

One explanation is that while foreign investors are aggressively buying up the belly of the curve, they are even more aggressively selling the other parts of the curve, namely both the short (sub 2 Year) and the Long (10-30 Year)...

That is a logical conclusion based on the evidence and current environment therefore it cannot possibly be accurate. lol

boiltherich's picture

Another is that there is a huge hole in the report; it said foreign holdings declined but did not say which foreigners.  Usually in the TIC reports it details the inflows and outgoes by region with "Caribbean" being one the largest holdings (Mar 2011 = 154.8 billion) and most active, only exceeded in size by China, Japan, UK, OPEC nations, Taiwan and Brazil.  Since the people of the Caribbean are not doing that much business in near endangered conch meat it is obviously just a money laundering scheme mostly for American corporateinterests and wealthy individuals.  In fact the money is deposited in Cayman Island banks as well as Bahamian banks and many others for all of 1/1,000th of a second before vanishing into the global black hole of untraceable assets.  It is usually a tax dodge.  It is usually also legal.  By dint of having been sent for a fraction of a second to the Caribbean it becomes "foreign" money and as such not taxable under the US corporate tax.  Perfectly legal as long as K Street keeps the bribes flowing to your congresswhore. 

km4's picture

Ben and Timmay 'shut the fuck up' with due credit to http://www.youtube.com/watch?v=3foXJfWlgoM

Yen Cross's picture

  Timmah is in hiding.Nice post Burnt Meat.

legal eagle's picture

I have some property for sale, how do I get the Fed to buy it. Oh, that won't work my property has value.

Yen Cross's picture

P.B.oC. will incite your request.

Reese Bobby's picture

Carry trade wobbly?

Yen Cross's picture

 My tRADES ARE ,(STEAD FAST). Old School.

Reese Bobby's picture

WTF does "STEAD FAST" mean?

My Filipino houseboy is more literate...and he's a "retard"

JW n FL's picture

you will never find any better help in the world.. ever.

Yen Cross's picture

 I guess the boys explained it pretty well! Thanks Fellas! Smiles.

americanspirit's picture

So the new F-35s are going to cost $1 trillion to maintain for their lifetime and we're going to have 2000+ of these monsters. Is that correct? So just this one airplane in our kitty is going to cost us 2000 trillion dollars - to "defend " ourselves against a bunch of ragheads? Couldn't we just buy them off for half price or less? What's wrong with this picture? 153 trillion looks like chump change.