Saudis, China Dump Treasuries; Foreign Central Banks Liquidate A Record $346 Billion In US Paper

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 $27.5 billion in one week, the biggest weekly drop since January 2015, pushing the total amount of custodial paper to $2.83 trillion, the lowest since 2012. One month later, we refresh this chart and find that in the latest weekly update, foreign central banks continued their relentless liquidation of US paper held in the Fed's custody account, which tumbled by another $22.3 billion in the past week, pushing the total amount of custodial paper to $2.805 trillion, another fresh post-2012 low.


 

Then today, in addition to the Fed's custody data, we also got 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, in fact quite massive $343 billion in Treasury selling by foreign central banks in the period July 2015- July 2016, something truly unprecedented in size and scope.

Fast forward to today when in the latest monthly update, that of July, we find that what until a month ago was "merely" a record $343 billion in offshore central bank sales in the LTM period ending July 30, one month later this number has risen to a new all time high $346.4 billion, or well over a third of a trillion in Treasuries sold in the past 12 months. 

Among the biggest sellers - on a market-price basis - not surprisingly was China, which in August "sold" $34 billion in US paper (the actual underlying number while different, as this particular series is adjusted for Mark to Market variations, will be similar), the biggest monthly dump going back to 2012, and bringing its total to $1.185 trillion, the lowest total since 2012.

It wasn't just China: Saudi Arabia also continued to sell its TSY holdings, and in August its stated holdings (which again have to be adjusted for MTM), dropped from $96.5BN to $93Bn, the lowest since the summer of 2014.

As we pointed out one month ago, 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 their holdings at a very troubling 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" both foreign and domestic 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 just two months ago yields had tumbled to near all time lows, suddenly the picture is inverted, and long-yields are suddenly surging on concerns the BOJ, the Fed, and maybe even the ECB will soon taper their purchases of the long end.

What happens if in addition to the relentless selling from foreign official institutions, private sellers also declare a buyer's strike. The answer? More Fed monetization of US debt will be the most likely outcome, aka more 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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offwirenews's picture

That's it? Nothing troll yellen can't handle.

bamawatson's picture

when will my tesla be delivered ?

JamesBond's picture

So the Bond Market may not be the pot of gold at the end of a rainbow after all?  Yeah, but the ride up was nice for those who knew the game...

 

 

jb

EmmittFitzhume's picture

Maybe they are preparing for Atlas(The Productive American) to shrug?

38BWD22's picture

 

 

In Hillary's America, everything we have seen over the past few days will become "The New Normal".

 

Stack and hide your gold.

 

Pladizow's picture

If they are selling treasuries, they are buying dollars. So whats the point? Unless, you then sell those dollars. So what if anything are they buying with those $'s?

Soul Glow's picture

In most cases to pay down their own internal debt.  The KSA especially has a liability problem.

The Saint's picture
The Saint (not verified) Soul Glow Oct 18, 2016 5:37 PM

If we could just find some aliens in outer space we would have a vast new market to sell, bonds, stocks and products to.  We could keep the ponzi going for ever then!

 

More Ammo's picture

You didn't read the emails?

 

As 2015 unfolds, I understand you are leaving the Administration in February. It is urgent that we agree on a date and time to meet to discuss Disclosure and Zero Point Energy, at your earliest available after your departure. My Catholic colleague Terri Mansfield will be there too, to bring us up to date on the Vatican’s awareness of ETI. Another colleague is working on a new Space Treaty, citing involvement with Russia and China. However with Russia’s extreme interference in Ukraine, I believe we must pursue another route for peace in space and ZPE on Earth.

 

https://wikileaks.org/podesta-emails/emailid/1766

The Merovingian's picture

Who down votes that? FFS, some people simply have no sense of humor.

Escrava Isaura's picture

I don’t understand how the article came out 9:34PM but the first comment was posted at 4:56PM.

Anyway, this news are not good news for America at all, because it tell us that offshore dollars are being used to purchase resources rather than it being lent to America. High inflation is around the corner.

Also, when the dollars loses control over the oil prices, it will trigger the panic that will lead to the crash that many here keep predicting for the wrong reasons, in my opinion.

Nevertheless, then, this whole thing will really start sucking.   

I hope the government can hold the collapse together, and without a WW, because, if you believe the collapse can being handled by the unprepared, corrupts, hypocrite private sector that’s even more bankrupted than the government, you’re in for an unpleasant surprise, to say the least.  

 

 

Loftie's picture

The SAUDIS are DUMPING following Congress's stupid Sept 11 Bill. https://goo.gl/oehIgG

philipat's picture

Hey Loftie, previously known as mofio then santafe then Aristotle of Greece then Gargoyle then bleu then oops then most recently lance-a-lot.

You are a serial spammer and a serial pain in the ass. Might I politely suggest that you go fuck yourself? And get a life.

PS. You might have noticed that my attempt to expose you for what you are is always the same. That’s because your Spam is always the same (Using fake links to your BS site which has no connection to your comments, which are deliberately dramatic to encourage people to click on the fake link) so it seems only fair that my exposure of your crap should also always be the same. An eye for an eye.

 

auricle's picture

This is the kind of stuff Hillary can fix with ease. To China, she will sell off US assets at record pace, and to Saudi Arabia, she will continue to waste Trillions more to bomb Iran, Syria and any nation that threatens Saudi Arabia and the petro dollar. She will do whatever it takes to protect the legacy of her mentor Henry Kissinger the architect of the petro dollar. Sick shit folks. I wish there were another choice out there. Too bad Trump is unelectable because he likes to finger bang women. 

 

Decifer the sarcasm. 

SoilMyselfRotten's picture

Don't tell me Belgium is back at it...

Tapeworm's picture

My cat fell asleep on the keyboard and somehow posted it.

 I spent a lot of effort to clean up my mess.

 Apologies to any that had to incessantly scroll.

CheapBastard's picture

But ... but ... but they have our Full Faith and Credit.

JRobby's picture

Calling Brussels, Hello.

They will dump it all as the hot war approaches. Trillions

HowdyDoody's picture

OT: But nice chess move.

Following the possibly failed US/UK attempt to shut down RT, news comes out that Russia has installed a new runway at the T-4 military airbase in central Syria, making it suitable for Russian aircraft. This airbase is about 60 km west of Palmyra. If S-400s go in there, they will cover almost the whole of Syria, definitely including Raqqa and Deir ez Zor. Looks like the no-fly zone has gotten just a little bit more no-fly. Will the US try riding shotgun for its ISIS boys shipped from Mosul to create a residual caliphate in east Syria? Watch this space!

https://www.almasdarnews.com/article/russian-military-builds-new-runway-...

 

 

 

Mustafa Kemal's picture

I guess we got a no fly zone.

webmatex's picture

Crimea ss400

Kalinagrad ss400

Iran ss300

syria ss300

Thats quite a no fly footprint.

India China too.

Egypt Iraq next?

 

BetaGap's picture

Hot war? If Killary approaches, a very long winter will come.

Offthebeach's picture

The phone only picks up on New York time.

tuetenueggel's picture

Maybe some shiny yellow metal ?
Or silvery shining metal?
We´ll see early enough.

tuetenueggel's picture

What they will buy with those worthless green paper ?

maybe shiny yellow metal ?

AGuy's picture

"If they are selling treasuries, they are buying dollars. So whats the point? Unless, you then sell those dollars. So what if anything are they buying with those $'s?"

Yup, Liquidating Treasuries to pay back investors, Creditors, business that want out of China & ME. However the redemptions are going right back in to US Treasuries as the recipients of the liquidated bonds turn around a repurchase the same US Treasuries.

If there was a Dollar confidence problem, we would see the dollar start tanking, PMs and other assets going up.

I think whe the Market finally snaps we might see a sell off in PMs which might offer a buying opportunity. I think a US dollar crisis is at least few years away. The US sucks, but everyone else sucks much worse.

 

DanDaley's picture

Q - So what if anything are they buying with those $'s?

 

A - The yellow shiny.

strannick's picture

So whose buying?

Well the ESF of course..

Boris Alatovkrap's picture

Here is question for adroit ZHer… If China or Saudi prince is sell US Treasury, someone is make it purchasing, no? If US Treasury is not repurchase security, then there is no detrimental effect to US, no? Except maybe future selling of bond which is draw lower bid because of excessive supply in market, yes? So, who is make purchase?

remain calm's picture

Why do you think they are selling.  THEY KNOW TRUMP IS GOING TO DEFAULT ON IT. THEY ARE GETTING THE FUCK OUT BEFORE THE FIRESTORM.

Omen IV's picture

Hillary moved $1.5 Billion to Qatar

sleigher's picture

Why is no one talking about that?  I saw that too and it seems legit.

Youri Carma's picture

SORCHA FAAL! i.a.w. not legit for the ones who still don't know what Sorcha Faal means.

Hillary Clinton’s “Sudden Move” Of $1.8 Billion To Qatar Central Bank Stuns Financial World

http://www.whatdoesitmean.com/index2141.htm

FatTony7915726's picture

someone in Belgium.  A financial terrorist called the Fed via a shell company!

AGuy's picture

No. its mostly investors looking to get capital out of China. In the case of KSA, they are under a cash crunch and need to cash in some of there savings to meet their budget demands. I am sure there are also lots of EU people looking to get capital out of the EU due to Negative Interest rates and the threat of banker bailins. The US Dollar is going up, while everyone elses currency is going down. I think this is going to continue, atleast until the fed restarts QE and NIRP. Its possible that when Deutche Bank goes busy the Fed Might need to step in with QE, but I can't say for sure.

 

 

cossack55's picture

Pick a name, any name, any name will do.  We all know who is behind the curtain, yes?

cheech_wizard's picture

Wasn't there a Belgium connection not to long ago?

http://www.zerohedge.com/news/2014-04-15/shocking-buying-spree-americas-...

But not anymore.

http://www.usnews.com/news/business/articles/2016-10-18/foreign-holdings...

Ireland 3rd, Cayman Islands 4th

Standard Disclaimer: This is a bit too easy at times. Now all I need to do is find some actual historical data.

Burticus's picture

Right, Boris, "Someone is make it purchasing."  I wanna know who the flock really bought the 350 billion FeRNsworth of Treasuries dumped by the Chinques & Towelheads, er, Camel Jockeys?!

How could retail sucker-bagholders, er, investors buy an extra f350 billion of Treasuries in a year?  By dumping f350 billion of stawks?  Without tanking the S&P?

You figger it must be the (not really) Federal (with no) Reserve buying 'em, plus the usual f1.4 trillion more Treasuries to cover the K.U.'s FYE 9/30/16 deficit, of course.  But, but, the Fed says they ain't monetizing no more debt and their balance sheet has stayed the same.  Maybe the ECB, BoJ, Belgium, Cayman Islands?

There is more to this story.

Kabissa's picture

Isn't a preciput function of any CB to prevent open market interest rates from rising above the pre-defined threshold (Federal Funds Rate, in USA's case) through the purchase of bonds occasionally being liquidated by whoever is dumping them ? How many Treasury bond markets are there, after all ?

webmatex's picture

I assumed that was a remit for the PPT The Working Group on Financial Markets?

Thus no evident paper trail?

I am logicly assuming a lot thought.

Mustafa Kemal's picture

One might ask who in their right mind would want to own US treasuries?

Lert's picture

In Hillary's America, everyone needs to lie, cheat, and steal just to stay even. How do you teach your children in her world?