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Foreigners Sell A Record Amount Of Treasurys Held By The Fed In Past Week
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.
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Shocker. China and Russia flexing there new found world authority (thank you obama) and they sell treasuries our Achilles heel
It doesn't really matter, soon the Fed will be buying 100% of US issued paper. The Fed will be buying 100% of issued stocks.
The bullshit will be complete and the Fed will believe they have reached a self sustaining permanent wealth creation mechanism.
Buy with Fed money, sell to the Fed for more Fed money, keep the profits.
This is Zimbabwe 101 the way the show is being run. I wonder how long now till the FED starts printing higher denomination dollar bills: $500, $1,000, $10,000....
Exactly. Those dollars will come back to the USA in a paper tsunami.
The FedRes is powerless in that situation.Maybe Kono is available to advise
Mr.Yellen.
"The FedRes is powerless in that situation."
War time! Blow shit up overseas before it blows up over here.
In the past you have stressed that it is short term paper that China has loaded up on bills and not bonds. However when you announce aselling number its assumed to be bonds over bills pretty generic? I have been watching money come out of the short end and filter out to the long end in recent months and believe your number but little of its reasons!
If I were to wager a guess, I'd bet on oligarcs placing a shot across the bow of the USS Financial Sector
It's when the 100B boomerangs back to the US ..............that it is a problem.
Decapitate the beast
I want to know whou BOUGHT?
'MyRa'
NSA knows
What, no "weather excuse"?
$100B is a nice round number: Someone is putting their hand on the US's financial left nut and giving it a stern squeeze. Feels like a warning.
... Not really. $100B isn't as big as it once was...
http://www.bis.org/statistics/r_qa1403_hanx13b.pdf
That's still 1.67% of outstanding USD-denominated fixed rate debt. Not an inconsiderable amount, especially for just one week.
How many entities do the Chinese and in turn Russians control indirectly like Mariachi puppets holding treasuries? We know the US has a few to come in for stick saves but if this becomes an overtime shootout...
The real question is who was buying?
FACT. Can we confirm who the buyer (s) was/were ? What did they really pay ? What was their creditworthiness ? Was it Mandrake the Magician ?
So, the sellers (China, Russia? will we find out who it was?) sold at fairly low yield / high price (before the big eventual sell off of US debt due to reduced confidence). Presumably they received US dollars from the sellers. What did they do with the proceeds? Did China sell yuan against the received USD to "weaken" the yuan? Did Russia buy rubles to bolster them against USD?
Who were the buyers? The Fed? Did they pay with newly created dollars or with ... what? If newly created dollars, then that is much more than a month's worth of QE.
Yuan and rubles were exchanged! Or wait for it SDR's or RIcion(bitshitcoin) but probably not dollars as they represent each other internationally. Maybe loans are improving and they don't need as much collateral
Why SDR? SDR would be still controlled by IMF. None of the US, Russia and China would like this idea. therefore, it would never happen.
Here come the question why Congress reject the IMF reform attached to Ukranianian humanitarian aids.
100% of the issued paper with 100% made in America monies freely remitted from a ever supporting income producing class? What is so wrong about a private Corp. Extracting its fairshare and donating the rest to Treasury. A process that you owe your entire working life? A system that spares no expence funding a military you are convinced you need. Even when you convinced yourself that you could live without the Fed now convince the rest of us. Nobody choices with in own means unless they are forced
So, the sellers (China, Russia? will we find out who it was?) sold at fairly low yield / high price (before the big eventual sell off of US debt due to reduced confidence). Presumably they received US dollars from the sellers. What did they do with the proceeds? Did China sell yuan against the received USD to "weaken" the yuan? Did Russia buy rubles to bolster them against USD?
Who were the buyers? The Fed? Did they pay with newly created dollars or with ... what? If newly created dollars, then that is much more than a month's worth of QE.
"Apple, Cisco Systems, Google, and Microsoft legally hold $124 billion in US Treasury securities and $39 billion in US government agency debt in accounts overseas, allowing them to avoid the 35 percent (maximum) corporate tax rate in the United States, according to Securities & Exchange Commission reports." in RT
It could also be these four scoundrels after seeing light. and the number match $124 billions
Oh, oh.......
No problem guys. Has the FED ever seen a treasury on the market it wouldn't just love to buy?
It must have a cause for these sellings. Could it be:
- Is This The Cheapest (And Most Levered) Way To Play The Chinese Credit-Commodity Crunch?"; or
- "Congress won't be able to authorize aid to Ukraine until after March 24 amid disagreements among several Republican....Many in his caucus reject expanding the IMF's lending capacity, which every other major country has approved."; or
-"What Happened To Flight 370? An Analysis Of What Is Known"; or
- "China Warns West Not To Enforce Sanctions Against Russia"; even
- "FALLING BANKSTER ZONE..."
Those IMF sucks. They are a leg ahead. After what happenend to DSK, they take the caution to put a woman in the lead. NO MORE SEX, scoundrels, sorry, scandals. Petraeus.
LeGarde? She's a goyish "beard."
Kahn's kin still rule the roost.
but money is everything, isnt it? Only a few, v.g., Chomsky is a way above his kin
But they're risk-free...hmmm?
Arent you that one who try to sold the emperor to the ruskies in Tilsit?
"Ruskies"? What's a rusky?
I read the title and thought 100 billion in a month isn't a big deal. No, this is 100 billion in a WEEK. Oh shit. I really hope people don't start running for the door. A slow rise of interest rates is much easier to handle than a sharp bond crash.
NO CONFIDENCE!
When the yield curve flattens, that's when I'll worry.
"Become the ocean, or be seasick everyday"
Holy crap!
Just remember shiny as interest rates back up what happens to the stack
http://news.antiwar.com/2014/03/13/kerry-issues-ultimatum-russia-has-until-monday-to-abandon-crimea/
Cause? Or effect?
After this war i predic the native indians would have a come back, because all side would be armed with stick and stone, no more supremacy on oneside. and the numbers of fighters on both side would be more or less in equilibrium..
"I know not which weapons will be used in WWIII, But WWIV will be fought with sticks and stones"
+1 for Einstien referance.
Time to buy an axe + machete to fight off the the zombie sheep hoardes.
I think it's almost show time. Any year now. I made the claim a while back that 2016ish was around the time that we'll see the shit hit the fan.
I hate being right.
For some, the fan is already clogged up.
and instead of axes they carry boom sticks
Did anyone else shit their pants when they saw that chart? This could really be the start.
It's called "return of capital" not "return on capital". Why does it take paper holders so long to wake up?
Well I hope this is the beginning of the end. Been waiting a long time for you all to catch up to this Kentucky Redneck in this slow ride down. My investments over the last 4 yrs has been gold, silver, lead, long term food and water. Just not in that order. My advice if this is IT is to know your neighbors and local community.
Taper, which fucking taper?! Twist 3.0 v coming soon
Twist again?
Like we did last summer?
Oh Ho... Very witty sir.
who cares the Fed will just sop up whatever is available to keep the party going. next.
yeah i agree, the bonds aren't real anyway. since the eletronic market for securities came on in the eighties nobody has a stock certificate, or a bond certificate (buy a TIP at auction and you get a cuspid not a cert) and while i am sure the books always balance (no i am not) it isn't hard to erase a few spots on a hard drive and pretend those bonds never existed. (not that they would really do that) the argument over whether a bond can be repatrioted, (can you take your cuspid to the treasury and get your money back?) remains open. if someone is selling someone is buying, and if the fed is buying then the bonds are retired or orphaned (but orphan is such an ugly word, like a Dickens novel) but when an issuer orphans a bond they don't have to pay the principle until maturity. there is probably a mechanism by which a bond may be repatrioted. (my pet theory is that the fed is managing deflation and the strategy is to extend bad debts until they mature. in the meantime who's paying the interest? well nobody if they hold the bond and the bond reverts to them anyway. its a very sophisticated shell game, but lets watch the money supply, if it goes up then something is amiss.
You mean this?
http://research.stlouisfed.org/fred2/series/BASE
Nothing amiss that I can detect.
yeah although that includes reserves held by fed banks which is notional or electronic. its also possible investors are dumping bonds and buying stocks, or maybe they already bought them on margin and now they have gotten the call (dow down 200+ yesterday and the MEDIA (CBS) had NOTHING TO OFFER by way of explanation) the foreign buying of US equities remains a primary driver of the permabull market. now EMs are getting pinched the hot (printed) money that went around is coming back to roost. in the end making electronic money real (repatrioting or what have you) should boost asset values through inflation. now they get the inflation they want, while asset values are falling naturally, and that friends is stagflation. if thats' it, to me the gold market and especially the juniors are flashing a signal and have been for a few months. fasten your golden seat belts its going to be a bumpy night.
Ha ha, you ain't seen notin yet.
Oh goody! A pending global currency crisis. That should be lots of fun!
what happens if due to currency volatility the BIS can't do its job? if there is a macroshift in currencies, and suddenly the US is weak dollar and now should be a manufacturing center, but it is not. it would take years for business to bring manufacturing back and shift the consumer base to EMs. its like suddenly you can't grow wheat in Montana, you can grow wheat in Texas, but the soil isnt right and there isn't any available land. of course these changes always happen slowly, unless you have some sort of policy (QE) which distracts you from the sea change in consumers and producers and real economic growth
... my guess is fall down & go boom!
More people need to get your picture here.
Clearly it's not just a matter of flipping a switch. And while under past instances we might have been able to make such a change I'm afraid that the mechanism is broken. EMs are pretty much dead now, and moving manufacturing out from their domain won't improve things for them (enable them to become the necessary consumer base). Really looks like it's game-over for the old model: and, unfortunately, there's no "new" model in sight (all energies have been spent/exhausted ramping up the old model [over-produce and export-> dump]).
Change We Can Believe In!
Excellent summary Seer.
Not up a creek with no paddle, Up a creek with no boat.
"Not up a creek with no paddle, Up a creek with no boat."
That's a good one!
I envision Wile E. Coyote running on top of that creek, looking down, the having that "WTF?" look and then sinking.
Looks like QE needs to be adjusted up to 400B a month to buy the tsunami. Peter Schiff, right again.
Government keeps increasing taxes and fees to support government union workers and their fat pensions.
Maybe it's Ukraine? (tongue-in-cheek) Or, the EU (does it collectively buy/sell USTs?)?
Might be that money is being collected to help foster Ukraine's "liberation." (pay off its bills)
Why is this data association all of a sudden in the news? It would be interesting to see what past data shows.
Fed Custody Holdings Record Decline Fuels Russia Speculationhttp://www.bloomberg.com/news/2014-03-14/fed-custody-holdings-record-dec...
I think someone is "selling" alright, selling propaganda...
USD slipping...
Now that is sanctions!
QE went hyperbolic?
Nothing to see here folks, the move into Euro debt is because BUBA will announce QE, wtih the intention or reversing the TARGET2 Imbalance and start the beginning stages of a German exit out of the Euro, remember folks, its much easier to gain contol of a country via currency control, than it is to ourtirght wage war. It is time for the FED to hand the QE reigns over to BUBA...cant wait
Buy UST/USD to support NATO bombs on Ukrainions and next Belarus.
Russia “Puzzled” Over Malaysia Airlines “Capture” By US Navy
Interesting to note, this report says, was that Flight 370 was already under GRU “surveillance” after it received a “highly suspicious”cargo load that had been traced to the Indian Ocean nation Republic of Seychelles, and where it had previously been aboard the US-flagged container ship MV Maersk Alabama.
What first aroused GRU suspicions regarding the MV Maersk Alabama, this report continues, was that within 24-hours of off-loading this“highly suspicious” cargo load bound for Malaysia Airlines Flight 370, the two highly-trained US Navy Seals assigned to protect it, Mark Daniel Kennedy, 43, and Jeffrey Keith Reynolds, 44, were found dead under “suspicious circumstances.”
http://www.whatdoesitmean.com/index1753.htm
Forecast is for continued cloudiness...
By: Sorcha Faal
+1. I followed Sorcha Faal for a few months, a few years ago. Until I realized it was nonsense and no predictions ever came true. Disinfo.
One has to wonder if this plane crash is part of a "canned", pre-planned false flag terror attack, just like the threat of race riots for France etc, this is the contingency for the collapse the USD ?
take the report with a big dose of salt....its by Sorcha Faal, a known disinfor agent.
Yeah..The Fed is going to raise rates one day AND stop QE. So fucked.
Foreign holders of US Treasuries are worried that Russia and then China will dump their holdings and they want to beat the mass exit. Smart...
Yeah, or perhaps this is just an excuse for them to do so (rather than seeminly doing it because they're desperate for money).
Bombs tend to go off via small sparks...
RELEASE THE FUCKING GOLD PRICE!
great tanks rolling,drones falling,russia bank hit by cyber viruis now this in....
Somebody just yanked $105 billion dollars worth of US government bonds out of the Federal Reserve, according to the latest data from the US central bank.
http://qz.com/188160/and-now-it-looks-like-russia-may-be-messing-with-th...
good time to recheck the bug out bag and your stacks hiding place
gosh, sell high buying low not a factor? even whats his name said sell bonds...
:)
It was Russia. Take that to the bank... And it's a tell that all those troops on the Ukrainian border are not just on a sightseeing holiday.
pfft.
Inflation... 100 billion is nothing these days. You need 12 zeros to play with the big boys now.
isn't it handy to be able to blame putin for the impending doom the usa and europe hath wrought upon the world. those evil empire building russians and chinese are causing world economic havoc with cooperation from their other coconspirators, brazil, most of south america, the pacific nations, india, the rest of the mid east, including israel and saudi arabia, all the stans. that makes up more than 2/3rds of the world land mass, people and money.
what is the confetti eagle to do? fluff its glittery feathers? and huff 'n puff? putin has to be careful here. he cannot overplay his hand. he has to let the caged glittery confetti eagle a way out. it is getting interestinger.
In order for treasuries to be sold, there needs to be dollars to purchase them in the marketplace. What if there are few willing buyers or the FRB doesn't provide the liquidity in order for the transaction to take place? If there are no willing buyers, than the market drops until there is value to be had and the secondary market responds at a price. We have an overlay where the market is supported to keep it orderly. Than it depends on what the seller does with those dollars that has in impact on their value and on the value of what they purchase. Unless the seller has a better use for those dollars than the treasuruies they hold, they are not going to sell. A better use of dollars could be trying to exert political influance over economics or protecting principal if the underlying dollars are losing value and become worthless. Do you really think that a soverign country is going to dump Treasuries, force a glut in dollars and reduce their purchasing power with those dollars? Got dollars that no one wants than FRB open market buying will support the dollar at any level that they want it to be at by selling treasuries unless they are politically motivated not to. Not a whole lot the market price depends on the markets these days.
Being sold to underwrite Ukraine's debts.
This is the Russian sanction for events in Ukraine.
And so it begins (we hope).
MASSIVELY OVERDUE.
And this is how monthly QE rises from $65B per month to $165B per month... without being reported as such. And this could increase several fold if a real frenzy gets underway. Let's hope so.