Foreigners Sell A Record Amount Of Treasurys Held By The Fed In Past Week

Tyler Durden's picture

A month ago we reported that according to much delayed TIC data, China had just dumped the second-largest amount of US Treasurys in history. The problem, of course, with this data is that it is stale and very backward looking. For a much better, and up to date, indicator of what foreigners are doing with US Treasurys in near real time, the bond watchers keep track of a less known data series, called "Treasury Securities Held in Custody for Foreign Official and International Accounts" which as the name implies shows what foreigners are doing with their Treasury securities held in custody by the Fed on a weekly basis. So here it goes: in the just reported latest data, for the week ended March 12, Treasurys held in custody by the Fed dropped to $2.855 trillion: a drop of $104.5 billion. This was the biggest drop of Treasurys held by the Fed on record, i.e., foreigners were really busy selling.

This brings the total Treasury holdings in custody at the Fed to levels not seen since December 2012, a period during which the Fed alone has monetized well over $1 trillion in US paper.

So is this the proverbial beginning of foreign dumping of US paper? Could Russia simply have designated a different custodian of its holdings? No, because as of most recently it owned $139 billion in US paper, or well above the number "sold" and a custodial reallocation would mean all holdings are moved, not just a portion. For another view, here is what the bond experts at Stone McCarthy had to say:

We don't have a ready explanation for the plunge in custody account holdings. One thing that is striking about the drop is that the last several days was not a period of heavy market buzz about "central bank selling" of Treasuries, at least to the best of our knowledge. China and Japan are by far the largest holders of Treasuries, with holdings of $1.269 trillion and $1.183 trillion in holdings at the end of December, respectively. China's holdings are more skewed to central bank holdings. Selling of Treasuries would appear to be at odds with China's recent effort to depreciate its currency, although on March 5 and 6 there was a brief correction in that trend.

As for the timing:

... the Wednesday-to-Wednesday decline was much larger than the weekly average decline in Treasury holdings of $46.6 billion. That implies that the plunge in Treasuries occurred later in week rather than earlier.

Some further thoughts from SocGen:

Weekly data from the Fed for US Treasury securities held in custody on behalf of foreign institutions and central banks fell sharply over the past week and may offer a plausible explanation as to why the USD has been offered pretty much all week against its major counterparts. EUR/USD in particular has stayed strongly bid since last week’s council meeting (to the bemusement of the ECB) and touched a high of 1.3967 yesterday before easing back after the exchange rate comments from president Draghi. The reduced appetite for USTs and strong demand for EUR debt and equity securities underlines the difficulties the ECB is encountering to stop the strong EUR from reducing inflation expectations in the euro area.


Foreign holdings of US government securities held at the Fed dropped by a whopping $104.5bn in the week to Wednesday 12 March according to the data published overnight (see chart below). This marks the biggest single weekly fall on record and compares with just a $13.5bn drop the previous week and a 4-week average fall of $1.5bn. The previous largest fall came in mid-2013 (26 June, a week after the FOMC meeting) when holdings fell by $32.4bn. The selling over the last week coincides with the latest US employment statistics, a run of weak data from China and the escalation of the situation in Crimea and Ukraine.


Russia has threatened to respond with sanctions of its own should economic measures be imposed by the EU and the US after the referendum in Crimea this weekend. Russia currently holds $138.6bn of USTs (based on December data) and the country has been a net seller for a combined $11.3bn of USTs over the last two months for when data is available. China sold $47.8bn alone in December. The latest Treasury International Capital (TIC) data for January are only due next week so we won’t find out officially until May how much Russia’s US government debt holdings dropped in March.

So either China selling TSYs and buying EURs to make European import power stronger, if not so much its exports (much to Draghi's ongoing horror). Or Russia, which may be dumping USTs to support the ruble... Or dumping just because.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
agent default's picture

Oooooops.  So mush for safe haven.

NotApplicable's picture

MOAR high quality collateral, amirite?

Divided States of America's picture

Its just a subtle way from China and Russia to say FU to the US.

SMG's picture

I raise my flags, don my clothes
It's a revolution, I suppose
We're painted red to fit right in
I'm breaking in, shaping up, then checking out on the prison bus
This is it, the apocalypse
I'm waking up, I feel it in my bones
Enough to make my systems blow
Welcome to the new age, to the new age

Vampyroteuthis infernalis's picture

I am practicing on my computer now, Ctrl-P, Ctrl-P.............

Manthong's picture

The west is like a moth to the flame..

a bug to the zapper.

..but it is all to distract from the massive failure in process.

YBNguy's picture

Don't worry, the FEDs will blame it on cold weather

HoofHearted's picture

All of you are making this implicit assumption that Ol' Yellen won't allow debt destruction to cause deflation. Yeah, I'm laughing as I type it too. 

We'll all be broke trillionaires soon. Luckily I've got my farm to keep me eating, and the protection to make sure none of you bitchez come try to eat my peas. 

Osmium's picture

I don't like peas.  What else ya got?

fonestar's picture

The Fed is the junkie of last resort.

zaphod's picture

Who cares? The FED can just buy it all. Seriously what's the issue with free money, I mean it's FREE!!

Occident Mortal's picture

Quick... somebody call Belgium.

Jack Napier's picture

Sure, the Fed can make up the difference, but then they'd have to concede that the taper is off, that there is no cure for QE except more QE, and the emperor's proverbial clothes would be removed for all to see.

Of course we all know that, but success in class warfare requires giving people a lie they can believe in, no matter how irrational. Without the lie the jig is up.

Plus there is the hyperinflation genie to contain. Default may be the bigger spectre, but deflation is a joke.

MedTechEntrepreneur's picture

Paging Kyle Bass...Paging Kyle Bass...Entropy update please?

fonzannoon's picture

I wonder when ZH is going to retract this articles heading because this was not a sale of treasuries that took place.

Panafrican Funktron Robot's picture

I agree that the title is slightly misleading; the drop in this metric is merely strongly suggestive of a large sale.  There would be no functional reason for a drop in this metric apart from sale of the treasury securities.

In other words, if it wasn't a sale, what the hell was it then?  I know it's not a mark to market revaluation of the held securities, and there would be no reason to change the custodian given the product we're talking about.

fonzannoon's picture

"However, Marc Chandler, chief Treasury strategist at Brown Brothers Harriman, said everything points to Russia, starting with the timing of Sunday's Crimean referendum and the potential for Western sanctions. He said rather than selling the Treasurys, Russia simply transferred them out of the U.S.

"Everything (Russian President Vladimir) Putin is doing is being extra cautious about retaliation, like bringing troops right to the Ukraine border," said Chandler. "The other reason I say it's most likely Russia is you look at the countries that have the largest reserves. It doesn't feel like it's China because China has enough on its plate."

Chandler said about half of Russia's foreign currency reserves are held in dollar-denominated instruments, and this would be about 80 percent of those dollar holdings.

"It could be somebody else, but it does seem circumstantial just on the timing alone," said Chandler.

He also said there are precedents for this type of behavior by Russia.

He pointed to the birth of the Eurodollar market—dollars outside the U.S. In 1956, when the Soviet Union invaded Hungary, it feared the U.S. would retaliate with financial muscle, and Russia-based Narodny Bank shifted dollars from the U.S. and deposited them in its London branch, he noted."

Jack Napier's picture

Is it such a stretch that China did the selling to scratch Russia's back?

kito's picture

its a stretch to think anybody is unloading massive amounts of treasuries right now. i think it was harbanger who has been relentlessly proving that there is no issue with u.s. paper. its all being absorbed and welcome with open arms for now. certainly that could change in an instant. but its a total non story for now. fonz is absolutely right. tylers headline is misleading

just-my-opinion's picture

Must be WAR....or is it human nature

DisArray's picture

It's always cold somewhere in the world.

kaiserhoff's picture

China is trying desperately to cover it's markers, when every truckload of copper has been sold four times and borrowed against five.  It's show time.

pods's picture

I would say that is the most plausible scenrio.

It is not like other nations aren't running Fiat ponzi's and printing. One big one goes down, they all do.

Can kicking is getting more and more expensive.


Tabarnaque's picture

If foreigners are selling, then someone has to be buying, no? So the question is: Where are these toxic treasuries ending? In US banks of the Fed is expanding QE instead of tapering? 

Divided States of America's picture

Much like whats going on with the MH370 plane debacle, NOBODY (or NO country) is telling the truth NOR willing to work with one another because they cant TRUST each other.

The blocks are in motion for some major SHTF event coming up momentarily.

just-my-opinion's picture do you loose an airplane....I mean a big one

If you play poker....It's time to play your hand

New England Patriot's picture

It's sitting in a hangar somewhere being repainted with Lufthansa and having the middle third of the passenger rows removed.

Transformer's picture

And whatever has happened to it, Boeing has known all along.  All 777's are monitored in real time, all parameters, via their satellite system. 

After 6 days, Boeing happens to mention that they were getting reports from the plane for 4 more hours?


Wahooo's picture

Were there even passengers on it?

MeelionDollerBogus's picture

Could be an easy variation on losing a boat.

All aboard Zerohedge Asian Airlines.

CrashisOptimistic's picture

"If foreigners are selling, then someone has to be buying, no? So the question is: Where are these toxic treasuries ending?"

Bingo.  Almost.

They are ending up in the pockets of people who urgently want them and have been willing to pay up the price to get them, because that's what anyone rational does in deflation -- you buy bonds and you pay more for them and that drives the yield down.


Babaloo's picture

We would know if the Fed were expanding QE because we see the amount of bonds they're buying every day.  They have stayed on their previously announced schedule. 

The selling by foreign parties has been met by what looks to be domestic sources, and in fact the bond market has rallied substantially into the above mentioned selling.

IOW, the sellers have been wrong, assuming they could time their selling rather than the selling being forced.


TahoeBilly2012's picture

Listen up Zero Hedge spuds. The Fed will soon own ALL US mortgages!!! Stop and understand what that means. People need to understand this is NOT a failure but a Satanic plan. Get your head around it time is short.

GubbermintWorker's picture

But the gov't will be willing to rent those homes to us serfs.

Billy Sol Estes's picture

Stopped reading when he got to the part about 'Romney should have won 2012.'

LawsofPhysics's picture

Please, when it comes to ownership, The Fed is NOT the government.

Kirk2NCC1701's picture

True. But I think he's saying that the Gov will be the PMC (Prop. Mgmt. Co.) for the Owners.

You know how these Arms Length biz relationships work. ;-)