Foreigners Sell Second Largest Amount Of US Bonds Ever In Past Week, Record $93 Billion In US Paper Sold In Past 2 Months

Tyler Durden's picture

Two weeks ago when we reported that there had been a record consecutive week dump of US Treasury paper in the Fed's custodial account, as reported by the weekly H.4.1, we made the assumption that this was China preemptively selling US paper. Well, that may or may not have been the case, but it was only part of the full story. We have now learned that Europe, and especially Germany has been just an active seller of sovereign bonds, most certainly including US paper, in recent weeks. As FAZ reports, the head of Commerzbank Martin Blessing has been dumping all bonds in his possession, primarily PIIGS paper, but also US and German ones. He does add the clarification that this has been a complicated project as there has been a buyer's strike (and with the CDS extinction it will only get more difficult as there is no natural hedge remaining), and his dumping has certainly not made things easier. Now as we all know by now, when starting a panic exodus, one has to be first, be smarter, or cheat. Here we will add a fourth one: or sell US paper. After all the demand for this is nearly insatiable, or so the neo-Keynesians out there will have us believe. Well, in the last week, someone used our definition. According to today's update in the H.4.1, the total amount of securities held in the custodial account for foreign official and international accounts just plunged by $20 billion, of which $19 billion was attributable solely to Treasurys: the second largest weekly dumb ever. And since this total number includes both Treasurys, which are used for political purposes, as well as Agency securities, which don't really serve much in terms of a diplomatic statement but are great at shoring up liquidity, one can assume that the relentless selling in all types of US paper has had one purpose only: to generate capital. As the third chart shows, that amount is substantial: in the last 8 weeks foreigners have sold a unprecedented $93 billion across the custodial account bringing it to $3.392 trillion, the lowest since March 2011! So the next time someone asks where European banks are finding emergency liquidity now that commercial paper, money market and Libor Markets are all dead, you will have the answer.

Chart 1: Total Treasurys held in custody and weekly change: in the past week $19 billion worth of Treasury paper was sold, the second largest weekly amount ever.

Chart 2: Total securities held in custody and weekly change: in the past week, $20 billion worth of paper has been sold.

Chart 3: Rolling 8 week change in the Fed's custodial account

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MFL8240's picture

Selling PIIGS bond or selling US Bonds, all the same crap.  Both insolvent and printing money.

disabledvet's picture

"monetizing the debt." not insolvent. I'd say we've made it to about the year 1840--shall we call it a "cyclical recovery in government"?--granted things were much cheaper back then. And we had the Wagon Wheel (if you had a wagon wheel back in the day you could do anything!). Now we have "space shuttles." perhaps an upgrade then?

acttang's picture

The PIIGS beg to differ: they WISH they could print money, but this darn EURO thing is such an inconvenience... 

LuKOsro's picture

The benefit of the latter is that people (and sovereigns) are still forced into purchasing dollars. How long will this still be happening no one knows. Even though  I would not hold my breath on it, the dollar's days as a reserve currency are numbered. 

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http://journey-to-alpha.blogspot.com/

haibop's picture

It's like the market getting trapped..foam.

FunkyMonkeyBoy's picture

Yep, looks like the first time in nearly 4 years that it has definitively turned downwards. The top is in!

Gene8696's picture

+1. ...but I just finished watching a bootleg copy of "Margin Call"

broke433's picture

It's a good thing bill gross bought em all

acttang's picture

What makes it better is that now we can have a selloff after we chased the big bond short into the cage. This mkt takes no prisoner...

101 years and counting's picture

euro pd's selling their bonds to ben.  repatriot their usd into eur has created the ultimate short squeeze in all risk assets.  only 9 more months to go via op twist.

scatterbrains's picture

I agree, isn't this full speed ahead money printing ? Via twist,  fed is printing to buy bonds so that Europe can sell out and repatriate back home. The rising Euro is then pressure released via Swiss printing to maintain the peg... a  circle jerk of central bankers printing on the down low.

Shizzmoney's picture

At least someone is still BUYING them.

I'd ask for a discount on that shit.

Corn1945's picture

Low yield junk bonds guaranteed to lose you money.

hotkarlandtheclevelandsteamers's picture

So I would see this as highly deflationary...sell em rates rise, housing craters, adjustable debt becomes not sustainable.  But who the hell am I, I am not a black man posting with my shirt off who spends my time with big dinner parties and taking people out on my yacht.

J 457's picture

Minus the shirt off comments, I think massive selling and no buying could lead to higher rates, which would not only cause another housing burden, but make debt servicing more of an immedite problem.  I see that as bearish for equities.  Why risk the volatility if I can make a decent return in T-Bills.   But then again, how will they fund the deficit if they don't print?  This could lead to a real interesting political battle.  

Carlyle Groupie's picture

"posting with my shirt off"

Poor Reggie. One day when he is older and has matured intellectually he will reflect upon his youth. He will realize that he could have become a great analyst, one with credibility widely respected for his knowledge and work.

If only he could have controlled his own vanity.

He could have become the black Meredith Whitney. But he blew it with the clown antics and is known far and wide for this rather than that. A suicidal ego knows no reason.

Thank you from China!

oddjob's picture

But who the hell am I, I am not a black man posting with my shirt off who spends my time with big dinner parties and taking people out on my yacht.

Its not about being black, more akin to a psychopath with violent peacock syndrome.

http://www.theburningplatform.com/?p=18895

broke433's picture

They should call new Eurobonds eurobernenkes

lolmao500's picture

I would need a hell lot of money to buy those treasuries (like 20% interest)...

TruthHunter's picture

20% interest??

Of whose money?  If its your money, its a little low.

Comay Mierda's picture

Spx to 1360 at least in this epic short squeeze. welcome to the wolf market

jcaz's picture

Nice call, Octotrader....

UP Forester's picture

It is.  Where do you think all the 401k money is now, pretty soon it'll be "all in" to pump it up.  Hell, mine was only down 10% last quarter, they wanna make that back for their X-Mess bonuses before the dice come up craps....

Bobbyrib's picture

Seems about right. My co workers are telling me to take my money out of cash and put it into the market. I think I'll wait for the crash..

DormRoom's picture

Triffin dilemma alert.  The USD as the reserve currency cannot solve it's domestic objective (QE-deleveraging), without creating international problems (hyperinflation for BRICS, and stagflation for developed countries).

BRICS already have high inflation.  The UK is likely in stagflation.

 

The more the Fed prints, the greater economic problems for other nations.  It's a structural problem embedded in the Bretton Woods System, when the USD left the gold peg.

 

If the exit in Treasuries accelerates, shits gonna get real. 

 

Robert Fisk, wrote an article in 2009, about oil countries exiting the USD payment regime.  That plan may be accelerating.

 

http://www.independent.co.uk/news/business/news/the-demise-of-the-dollar...

Seize Mars's picture

Triffin dilemma alert.  The USD as the reserve currency cannot solve it's domestic objective (QE-deleveraging), without creating international problems (hyperinflation for BRICS, and stagflation for developed countries).

There is no dilemma. They do this on purpose. They want the power of reserve status specifically so that they can offload inflation into other economies. That's the only reason why the US hasn't collapsed already - because we have shoved so much inflation into China and elsewhere.

The more the Fed prints, the greater economic problems for other nations.  It's a structural problem embedded in the Bretton Woods System, when the USD left the gold peg.

Yes but it has nothing to do with Bretton Woods. It is a fully contemporary system of exploitation of the world's resources, in return for which they export little pieces of paper. Nice trick, eh?

If the exit in Treasuries accelerates, shits gonna get real. 

It will. Just watch.

Robert Fisk, wrote an article in 2009, about oil countries exiting the USD payment regime.  That plan may be accelerating.

Every oil producing country that has ever tried to exit the USD system has been bombed, invaded and occupied by the US. Do you know Ghadafi's sin? He tried to establish a gold-backed African currency. He had about 148 tons of gold. If you fuck with international paper bankers, you get killed by the USA. Go Team.

DormRoom's picture

The union of petrol nations may introduce a petro currency, backed by China & Russia.  So no US bombing.. maybe some drone attacks against the plan architects.

 

Maybe that's why the US wants to invade Iran so much.  Iran has been transitioning away from the USD as the currency of oil payment for a while.

trampstamp's picture

All in due time my friend. Even the big boys will get screwed. You can't screw the FED no matter what you think.

gwar5's picture

That'll be the day of the real reckoning, when oil is traded away from the USD.  Soon, very soon.  Putin is coming back and Russia is now the biggest oil exporter. He's made it clear what he will do. We're already road kill and the Karma truck is backing up to have another go. 

 

haibop's picture

And don't forget the Iranian situation too. beacon payday loans

Arkadaba's picture

Yep!. Been reading Fisk for years. Who is next? I'm thinking Syria as a test run for Iran.

acttang's picture

Totally agreed that the $ denomination was by design. Forgot which advisor to which president once said that "It's our $ all right, but it's your problem. Deal with it." We are at the dawn of these bozos not wanting to deal with it.

QuietCorday's picture

In my view, the only reason for the Libya campaign was Ghaddafi's moves towards establishing a new gold dinar. Someone is moving Mudgie catalysts, known as "rebels" in this case, round the region as though it was a game of Axis and Allies. 

The one to watch will be Turkey/Cyprus over drilling rights, with Greece, Lebanon and the wider EU pulled into the arena, with Russian and Gulfie pressure then into the mix, most likely. The potential for that to go nuclear doesn't bear thinking about, with the Greek state crippled, Europe a mess and Turkey finally realising the EU is a bum deal but having complications from turning their eyes instead to Syria (another current "rebel against the state" zone). Makes me wonder if this is why Hamas are trying to appear more reasonable recently ...   

TruthHunter's picture

"If you fuck with international paper bankers, you get killed by the USA."

 

OWS, take notice.

 

The rules didn't change because you are young, broke, and idealistic.

11.11's picture

Just in time for HARP 2.0.  Gotta let the people take advantage of these historically low rates.

Yen Cross's picture

 This is a GREAT thing! justWatch The Wave.....  Back in the old days a ghost told me that consolidation was taking place.

 

    Ok, payback is a bitch.  Just remember gravity, is the only straight line trade! I'm out

msmith's picture

A look at the ES, DX, and GC shows that the "risk on" move is very near a key turning point as the wave counts are near completion.   The USD index may have already found some support from which to work higher from.  If so, it could encourage equities to return to the larger trend lower.  http://bit.ly/uZ0Uwd

jcaz's picture

...Or.... The 200 DMA might be resistance.....

Seriously, one hot month and the kids think stocks go straight up again.

NOTW777's picture

look at a weekly of $tyx.

oct 2011 looks similar to dec 2008