What Is Behind The Record Sale Of $75 Billion In US Treasuries By "Foreign" Holders

Tyler Durden's picture

Lost in the noise surrounding today's dramatic Fed rate decision and Yellen press conference, was the latest TIC data which earlier today revealed something unexpected: during the month of April, when stocks were soaring, foreign official and private entities sold out of virtually all asset classes, including sales of $2.8 billion in stocks (following a $16.5 billion sale the month prior) and $20.9 billion in corporate bonds, offset by $29.5 billion in agency purchases.

 

But it was happened with Treasury transactions that was the most notable: dumping $74.6 billion, foreigners sold the most on record in the month of April according to Treasury Internatioanl Capital, or TIC, data.

 

Or rather "foreigners."  Because as SMRA adds, based on the transactions data, the major seller of Treasuries in April by far was the Cayman Islands, with net sales of notes and bonds of $47.1 billion. When we add bills, investors in the Caymans were sellers of $51.5 billion of Treasuries in April.

And here's the twist:Cayman Islands is basically how TIC data defines hedge funds, most of which have an offshore domicile for tax purpose at this location.

As Stone McCarthy adds, over the last few years, a big gap has emerged between the change in Treasury holdings by investors in the Caymans and activity implied by the transactions data.

The holdings data for April showed a relatively small decline in Treasury holdings by investors in the Caymans of $6.5 billion. The holdings data show investors in the Caymans increasing their Treasury holdings by a cumulative $136.1 billion since December of 2011, when Treasury began reporting foreign holdings of securities on a monthly basis.  Meanwhile, the transactions data imply a cumulative reduction in holdings of $139.9 billion over the same time period, a $276.0 billion discrepancy.

According to economists at the Federal Reserve, the divergence between the transactions and holdings data for the Cayman Islands may reflect increasing short sales of Treasuries by entities located there, which may in turn be related to growing securities lending demands. Short sales would be reflected in the TIC transactions data, but the TIC holdings data don't reflect short positions or borrowed securities.

In other words, in April - just as yields were rising again on hopes of another inflationary spike - hedge funds were rushing to short Treasurys. Alas, with the 10Y tumbling to 2016 - and soon record - lows, expect all these tens of billions in "discrepant" positions to be promptly unwound as numerous entities are forced to cover their shorts, in the process sending yields even lower across the cruve, perhaps to new all time lows.

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coast's picture

I emailed Jim WIllie:

if ships will not unload because they dont want dollars does not make sense to me...I would unload for dollars, then just buy gold/silver since its so cheap now, and since the dollar is doing ok for now etc...ok then.    Cant they just change the dollars to silver, which is actually a good investment? I get paid in dollars, and I use the dollars to buy silver..

his answer:

your point does not make sense though

if high volume, hard to cash in the USTBills

cannot buy silver since it extreme shortage

where to buy $1 billion in silver ???????????????????

 

Cognitive Dissonance's picture

Mr Magoo liquidated in order to leave planet Earth. He's had enough of this silliness.

knukles's picture

Why is it great waves of pleasant schadenfreude wash over me when ever I read of hedge fund shenanigans that ain't workin'.
This is what happens when most HF managers are ex-bond and stock salesmen out for the 2&20 exclusively.

philipat's picture

Why would anyone buy UST's when you can get a nice negative yield on German and Swiss paper?

lasvegaspersona's picture

Just remember, Jim is amusing and creative...but I think he might be insane.

Cognitive Dissonance's picture

LOL

I might not go that far. On the other hand, he does listen to "The Voice".

conscious being's picture

The insane thing is cover. He doesn't want to end up on the wrong end of a nail gun.

O C Sure's picture

"According to economists at the Federal Reserve,"

 

Come on, ZH!

 

Focus on your Manifesto, please. It is just.

johngaltfla's picture

IF you are a foreign nation and can see the war which is coming, would you want to hold the paper of the loser? Nope, and please, everyone, tell me how well your Mussolini Bonds are doing...

The US Military is Not Ready for World War III
knukles's picture

Mussolini bonds.  Where oh where did I put those little devils?
They looked fine to me last time I saw them.
Now lemme see here ....

Consuelo's picture

 

 

 

Funny you mention 'ole Uncle Jim Willie, because the very First thing that caught my attention was seeing 'Cayman'...

 

As in:

 

Brazil, Luxembourg, Ireland, Cayman, Swiss- or, 'BLICS' for short...

iAmerican's picture

Vatican banker-intermediary Rothschilds' unconstitutional money scheme is heading to the toilet.

Time for the American People to prepare to seize all assets owned by the Beast Fifth Column in Our Country, arrest its principals, and seamlessly implement a constitutional currency, as attempted by JFK.

 

Death for Treason

Restorative_Ally's picture

What would be your preference on a means of execution? I'm thinking: let hungry rats eat them alive.

SoilMyselfRotten's picture

To feed hungry rats with them would imply they were actually good for something

iAmerican's picture

It will be fitting to rebuild the gallows at Ft. McNair and have a much more thorough trial for treason, with all historical "Whig Interpretation of History" corroboration, from Golgotha to the Holohoax, Dealey Plaza, and 9/11, than those given Roman Catholic Booth's Roman Catholic accomplices at Ford's Theater, also hanged at McNair.

Also the Fasces, Rome's logo, the means by which the Khazars effected punishment under codified Roman law, must also be banned from Our Nation: removed, finally, from the front wall of the U.S. House.

shovelhead's picture

So I guess The Inquisition wouldn't be an option?

Those Dominicans don't like the Jesuits but there may be some brand loyalty.

iAmerican's picture

All Rome's and their Khazar partners' assets in Our Land must be seized, and their hierarchy expelled, other than American citizens convicted of treason.

O C Sure's picture

By ballots or bullets?

 

Article V, anyone?

iAmerican's picture

The Fifth Column will go overboard against the People and the fundamentally decent Americans working .gov will rebel to align with the sovereign People against the known Beast of the Anti-Christ now upon us, unable to kid themselves having gained full knowledge of the NWO, satanic treason being committed. Rank and file military and field and junior grade officers will refuse to follow the orders of known pedophile homosexual flag rank. By God's grace the Beast shall be cast down, praise God.

 

David Rockefeller, the Vatican's principal intermediary in America's usurpation by the Beast of Gog and Babylon, has admitted his treason. His Bush/Clinton pyramid of accomplices will be easily arrested, tried, and hanged with him.

kliguy38's picture

Once they all head for the exits it'll make the Titanic look like a lil boat ride in Central park......That door is so small it'll jam up in a nanosecond....and they all know it

scintillator9's picture

Much like trying to execute "a trade" around 9 AM EST on August 24, 2015.

Either one's trade took forever to execute, or one simply could not log in.

What was really interesting was watching the "values" on my screen simply not be available, for I was either wealthy beyond my dreams or wiped out, or both.

 

You Only Live Twice's picture

This is more complex than that. The US dollar survives because of the Petrodollar System, but with continuous low Oil prices in an expanded dollar=debt environment, these Petrodollars are not only being not converted in UST as there are no surpluses, they are being withdrawn and used. This is how this begins - the death of the Petrodollar and the disenfranchisement of the US dollar. It is not a sudden thing. It is gradual. Sooner or later, these dollars are making their way home, and inflation that was spread out will return. That is why the Fed is in trouble. It raises rates the markets tank. But it will have to at some point as a way to deal with the storm ahead.

azusgm's picture

Please explain to simple-minded me how on earth Grandma Yellen can put on a straight face and talk about raising rates while Europe and Japan are going negative. If the USD tries to go to Hades and prospective buyers demand a risk premium, this foolish talk may be useful as a way to misdirect the world for about a nanosecond. Otherwise, she and her partners in crime should close the office, go play golf with Barack Insane Obama, and quit pretending that everything is under control and will be fine.

 

It would be nice if the Fed could quit waterboarding the pension funds and the savers, but the Fed and the govt can't un-nuke the country.

You Only Live Twice's picture

The Fed wanted to prevent the upcoming inflation by doing pre-emptive rate hikes. But, they still have their head in the sand at this point. The problem with US debt and the Dollar vs the BoJ is that most Japanese debt in home-based, while the US debt via the dollar is spread out via the Petrodollar system. The problem for Yellen is the disbelief. This non-action on rate hike will create a loss of faith in the dollar and the Fed. Yellen's straight face is because the Fed and the Wall Street Bankers are at this point still disconnected from reality.

HelloSpencer's picture

Who on earth would want to hold on to USD denominated debt. It will be worthless.

You Only Live Twice's picture

Precisely. But since all US money begins as debt through the Fed, then if no one wants or needs that debt-based money or needs to use these dollars, then it will return home. Then, difficulties will really begin.

squid's picture

"Who on earth would want to hold on to USD denominated debt. It will be worthless."

Agree but....

If every other central's banks' balance sheets were clean, what you and I say would be true. Wouldn't touch a US Treasury with a 10 foot pole....but every other central bank's balance sheet is WORSE than the FED.

 

Throw into the mix the fact that 60 years of propagada aganst gold and here we are.

 

It will right itself and its GOING to be messy.

 

Squid

thinkmoretalkless's picture

True. This will be a period of learning the hard way. I'm probably too old to benefit when the lessons are learned. It was a gut feeling 7 years ago that led me to live by a few rules. If it is not in your possession you don't own it. Put a buffer between yourself and other people. Hope for the best but prepare for the worst. There are worst things then dying.

You Only Live Twice's picture

That is why Russia, China and India are moving to Gold. And Soros knows this, and is moving to that direction too.

You Only Live Twice's picture

They are all in trouble - that is whay NATO is posturing against Russia, which it sees as the current no. 1 de-dollarizing nation. It will be a mess, but it will end when OPEC decides against the Petrodollar.