Foreign Central Banks Sell A Record $343 Billion In US Treasuries In The Last Year

Tyler Durden's picture

One month ago, when we last looked at the Fed's update of Treasuries held in custody, we noted something troubling: the number dropped sharply, declining by over $17 billion, bringing the total to $2.871 trillion, the lowest amount of Treasuries held by foreigners at the Fed since 2012. One month later, we refresh this chart and find that in the latest weekly update, foreign central banks accelerated their liquidation of US paper held in the Fed's custody account, which tumbled by $27.5 billion in the past week, the biggest weekly drop since January 2015, pushing the total amount of custodial paper to $2.83 trillion, the lowest since 2012.

 

Then today, in addition to the Fed's custody data, we also received the latest monthly Treasury International Capital data, which showed that the troubling trend presented last one month ago, has accelerated. Recall that a month ago,  we reported that in the latest 12 months we have observed a not so stealthy, if massive $335 billion in Treasury selling in the period July 2015- June 2016, something truly unprecedented in size and scope.

Fast forward one month, when in the latest monthly update, that of July, we find that what until a month ago was "merely" a record $335 billion in central bank sales in the LTM period ending June 30, one month later, this number has risen to a new all time high $343.4 billion, or well over a third of a trillion in Treasuries sold in the past 12 months. 

Among the biggest sellers if on a market-price basis, not surprisingly, was China, which in July "sold" $22 billion in US paper (the number is different - the tracked total shows, bringing its total to $1.219 trillion, the lowest total since 2012.

What is becoming increasingly obvious, is that both foreign central banks, sovereign wealth funds, reserve managers, and virtually every other official institution in possession of US paper, is liquidating it at a never before seen pace. In some cases, like China, this is to offset devaluation pressure; in others such as Saudi Arabia, it is to provide the funds needed to offset the collapse of the petrodollar, and to backstop the country's soaring budget deficit.

So who are they selling to? The answer, at least for now, is private demand, in other words just like in the stock market the retail investor is the final bagholder, so when it comes to US Treasuries, "private investors" are soaking up hundreds of billions in central bank holdings. We wonder if they would do that knowing who is selling to them.

Meanwhile, while a month ago yields had tumbled to near all time lows, suddenly the picture is inverted, and long-yields are suddenly surging on concerns the BOJ will soon blow up the bond market.

What happens if in addition to the relentless selling from foreign official institutions, private sellers also declare a buyer's strike. The answer? Why, more Fed monetization of US debt, of course, better known as QE. We bring this up because, amusingly, the Fed is still harboring some naive hope it can/will raise rates in the coming week and/or months.

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Belrev's picture

VIDEO PROOF THAT CLINTON STARTED OBAMA BIRTHER MOVEMENT

https://youtu.be/dBO6LOtUFzg

GUS100CORRINA's picture

AMERICA IS THE TITANIC THAT HAS HIT THE 'DEBT' ICEBERG. ABANDON SHIP ... ABANDON SHIP ... IT IS TIME MOVE OUR 'ASS')ETS TO A MORE SECURE TOILET.

knukles's picture

They can drag this out longer than impoverished people mate.

bob_bichen's picture

The ZH headline for this story is now reading:

"Foreign Central Banks Sell A Record $343 Billion In US Trasuries In The Last Year"

I think they meant to spell the word  TRASHuries.   Just add an "h" and have we Truth In Advertising.

johngaltfla's picture

What a bunch of raciss's. Don't day know dat makes King Obama look bad?

stacking12321's picture

"US Trasuries"?

tyler starting a new meme: us trashuries

zrussell's picture

Here's a violin- now play some happy music!

buzzsaw99's picture

In some cases, like China, this is to offset devaluation pressure; in others such as Saudi Arabia, it is to provide the funds needed to offset the collapse of the petrodollar, and to backstop the country's soaring budget deficit...

Thank you for that. I was afraid the peanut gallery was going to have to point those and other issues out while the author attempted to make some outlandish claims.

buzzsaw99's picture

The answer, at least for now, is private demand, in other words just like in the stock market the retail investor is the final bagholder, so when it comes to US Treasuries, "private investors" are soaking up hundreds of billions in central bank holdings. We wonder if they would do that knowing who is selling to them...

I'm a buyer and couldn't care less.

knukles's picture

Plus, I'd betcha, as was the methodology long ago and to my knowledge has not changed, that a huge preponderance of foreign central bank sales (and purchases, by definition) are done via their account (directly at) the NY Fed and as such, never see the light of open market sales.   If it were executed (in the past) in the open market on behalf of a customer, such was stated.  Now, about those "quaint" open Market operations.
90% of the portfolio managers and traders out there has never seen one
No more than he's seen a baby pigeon in Manhattan

buzzsaw99's picture

good point. there are many ways to own USTs that don't involve fed custody. if anything this is a vote of no confidence in janet and her bunch. a person could get IRANed, SWIFTed, hell keeping assets at the fed is just asking to get fucked.

Bam_Man's picture

I own them too. Zero-coupons with 12 years to maturity. Sweet spot on the yield curve.

Would you rather be in a Money Market Fund yielding NOTHING, whose NAV will be allowed to fluctuate (meaning drop below 1.00) when the new "rules" go into effect on October 1st?

I didn't think so, and neither do I.

Theta_Burn's picture

Nice parting gift for the moron in chief.

That, and not rolling a staircase to AF-1..

 

 

 

debtor of last resort's picture

Haruhiko just bought a 7. Had to stand in line for a few minutes but mister Yellen managed to jerk him off before he left for Italian gov bonds.

NoWayJose's picture

Private investors are not 'private' - per se - but are hedge funds and mutual funds trying to front run the Fed (in hopes that a greater sucker - the Fed - will buy later at a higher price).

farmerbraun's picture

I believe that the correct spelling is  "trashuries".

But hell, if you can get something for them . . . . go for it  . . . . quickly.

rlouis's picture

Do foreign holders pay taxes to the Treasury when they take capital gains on the sale of bonds?

sinbad2's picture

The whole world pays tax to the US, via money changing fees.

withglee's picture

So who are they selling to? The answer, at least for now, is private demand, in other words just like in the stock market the retail investor is the final bagholder, so when it comes to US Treasuries, "private investors" are soaking up hundreds of billions in central bank holdings. We wonder if they would do that knowing who is selling to them.

So, if the CB's weren't selling, the private investors could find none to buy? How much are the CBs having to discount them to get the PIs to buy?

What happens if in addition to the relentless selling from foreign official institutions, private sellers also declare a buyer's strike. The answer? Why, more Fed monetization of US debt, of course, better known as QE. We bring this up because, amusingly, the Fed is still harboring some naive hope it can/will raise rates in the coming week and/or months.

In only two exceptions I know of (one where they sent out a $200 check to everyone ... I sent mine back with a note they don't have $200 and should be hanged ... which brought me a visit from two Secret Service agents, who got stuck in the mud on my property, the other being where they deposited straight into my account and I didn't write a check and send it back) ... with the exception of those two cases, QE has been about the Fed buying up junk from elites at face value bailing out their sorry behinds with money they counterfeit. And that's just business as usual... i.e. government financing itself with inflation ... and having the audacity to say inflation is zero.

Go figure.

Sorry_about_Dresden's picture

Treasury issues the debt, debt is used as collateral on oil purchases from SA, Feral Reserve issues list of bonds they will buy in Dutch auctions to simulate demand and suppress interest, they conspire with other central banks to continue ponzi until eventual collaspe.

Evidence right here in Feral Reserves on white paper. All one need do is read paper to see what they do! Feral Reserve holds $4.5 trillion on balance sheet consisting of UST bonds and MBS to keep RE market artificially inflated.

Through....... the end of the sample period in our study, the Federal Reserve (Fed) purchased $1.19 trillion of Treasury debt. These purchases are equivalent to about 28% of the total outstanding stock of these securities

https://www.federalreserve.gov/pubs/feds/2014/201448/201448pap.pdf 

The Congressional Budget Office is forecasting that the national debt, which currently stands at $19.5 trillion, will increase by $8.6 trillion over the next decade, reflecting rising costs for Social Security and Medicare benefits as baby boomers retire. That rising debt underscores the need for the United States to maintain high foreign demand for Treasury debt.

http://www.usnews.com/news/business/articles/2016-09-16/foreign-holdings...

 

Get a clue sheeple! Notice how they will bury this article now that someone questions their masters! Bye now! Going down!

withglee's picture

the Federal Reserve (Fed) purchased $1.19 trillion of Treasury debt.

When I make a trade I exchange something ... property ... money I have in storage ... or I have to certify my trading promise (i.e. create money ... capitalists who have co-opted the system and call it begging for a loan) allowing me to complete the trade over time and space.

The Federal Reserve here is depicted as a trader just like me. So, when they purchase this treasure debt (i.e. government created money with a promies to deliver and return it at some future time and place ... which of course they never do ... they just roll it over ... and that is default ... and intentional default is counterfeiting), what is the government getting in exchange from the Federal Reserve? Where did the Federal Reserve get what it is giving the government in exchange?

They talk of the CB balance sheet. Give examples of the CB's predominate assets, liabilities, and amount of net worth.

spencer's picture

Funny how comments steer away from the subject. Sheep following FOMC threats blindly. Nobody watches TIC report any more.

I guess it is hard to read from those graphs. Need better glasses. :)

There are pink glasses on sale in Macys. They are priced in US dollars. :)

 

This is a very important subject - that proves gold being the only alternative investment to holding gold stocks. :)

Basically selling gold now is suicidal.

Those who can still read - need to reconsider their commitment to Facebooks, McDonalds, Twitters and Apple. Holding these will hurt. :)

 

 

GRDguy's picture

They're unloading treasuries to buy gold.

Sorry_about_Dresden's picture

It is a shell game. Oil for UST bonds>Feral Reserve makes list of bonds to be assembled by PD>Feral Reserve puts UST bonds on balance sheet>Feral Reserve prints money to buy bonds in Ducth auction. Rinse and repeat.

tarabel's picture
So far as the regular financial world is concerned, USTs are as good as cash and easily convertible into the most-recognized medium of exchange on the planet. So, in the midst of a worldwide recession/depression, it's not too much of a surprise that many people who were formerly operating in the black are now operating in the red and cashing in some assets to cover the shortfall until things turn around once more. At least that is their plan. If you lose your job, you are going to cash in some of your baseball cards (or equivalent) to pay the mortgage and keep the lights on, right? It might be possible to ascribe evil intent if it were just one country, or a cabal of various players, but this seems to be pretty universal in nature.
konadog's picture

I agree with you, but I wonder if the CBs will be forced to dump hard enough to burst the bond bubble?  Old Yeller to the rescue with QE?  Ok, how many rounds of QE before all confidence is lost and the dollar collapses? Questions that keep me up at night.

Sorry_about_Dresden's picture

People here pontificate for years and have no clue to what goes on at the Feral Reserve, even when they published detailed papers of their Dutch Auctions and exactly what they do to suppress interest rates!

https://www.federalreserve.gov/pubs/feds/2014/201448/201448pap.pdf

Don't you realize this is just causing another asset bubble, and holders of these assets are going to get their clock cleaned yet once again? I am amazed at the level of denial that occurs here. 

Through........... the end of the sample period in our study, the Federal Reserve (Fed) purchased $1.19 trillion of Treasury debt. These purchases are equivalent to about 28% of the total outstanding stock of these securities

I recommend you spend what ever Janet Felons bux you can get your grimy little fingers onto, cause this ship has been chugging along, without a rudder since 1913, and the iceberg is dead ahead. This ship is going down!

http://www.usnews.com/news/business/articles/2016-09-16/foreign-holdings...

The Congressional Budget Office is forecasting that the national debt, which currently stands at $19.5 trillion, will increase by $8.6 trillion over the next decade, reflecting rising costs for Social Security and Medicare benefits as baby boomers retire. That rising debt underscores the need for the United States to maintain high foreign demand for Treasury debt.

$30 trillion in debt by 2026!!! WTF??

They brought the President of the Isreali Central Bank in, Stanley Fishcer, in 2007 to run the show at the Feral Reserve, to AIPAC's satisfaction. They are rubbing our face in it. 

Bunch of shills here.

Herdee's picture

These are the people that are acquiring most of the world's physical gold:

http://www.stockhouse.com/companies/bullboard?symbol=t.lex&postid=25234775

bleufair's picture

why is it selling treasuries bad for the US economy? i thought when bond price is down, yield is up, that should be good? no...?