Record Consecutive Treasury Dump From Fed's Custody Account

Tyler Durden's picture

While there were few nuggets worth mentioning in yesterday's H.4.1 update, one item is certainly worth noting. After we pointed out last week when we noted that there was a record monthly dump of Treasury paper from the Fed's custodial account amounting to some $69 billion, the week ended January 4 has seen yet another outflow, this time amounting to $9 billion in US Treasurys. This is the 5th week in a row of foreigners selling US paper, and while it has yet to match the record 6 weeks of outflows from October (discussed here), the consolidated outflow notional is now a record high at $77 bilion, higher than the previous record of $52 billion. Needless to say banks from around the world are repatriating dollars. The question is what they are converting the USD into, and how much longer will the go on for: the last thin the US can afford is a wholesale dumping of its Treasurys. Because as the chart below vividly demonstrates, the traditional diagonal rise in foreign holdings of US paper has not only pleateaued, but it is in fact declining: a first in the history of the post-globalization world.

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nope-1004's picture

"More sophisticated diets", I assume.

 

SAT 800's picture

What would the church lady say? "Well, isn't that special". very interesting; don't know what it means.

Hephasteus's picture

Neither do I but ever since MF global the euro can't stop going down and the dollar can't stop going up.

I don't know what is bullshit about the numbers on MF global but this thing is looking like at least a llheman collapse on the dxy chart.

And the dollar going up sharply with no economic activity is bad becasuse it means someone is bying something expensive in dollars.

StychoKiller's picture

Chineze buying Au/Ag?

Iranianz buying Pu/U?

More questionz than answerz...

trav7777's picture

yeah....one thing that's true is that the decrease in economic activity should lead to a reduced amount of dollars going to other nations to buy stuff.  Perhaps that is the discrepancy.

This reduced dollar flow *could* be causing some stresses in places where dollar funding is required to service dollar debt.

blindfaith's picture

remember many debts are in dollars not euros.  Farnkly, I'd rather take a truck load of dollars than a pail of Xeuros at this point...who knows how long the Xeuro is going to be worth anything in exchange.

Ask the Chinese how much they have lost in the last few days on xeros bonds and how much 'profit' they would have seen had they kept US bonds.

Eally Ucked's picture

" Farnkly, I'd rather take a truck load of dollars than a pail of Xeuros at this point" your right here.

Truck load of USD must be a bit better than pail of Euros, but you never know what future brings

Chuck Walla's picture

It means we are runnng out of suckers to sell our crap to.

Cdad's picture

The question is what they are converting the USD into

Answer:  central planning piggy banks and stuffed mattresses.

Funny...weren't we told for the last month that repatriation was flowing into Euro dollars?  Umm....not so much, I guess. 

Jlmadyson's picture

Very nasty chart for Mr. Timmy G.

No wonder they are going through so much cash with this kind of rollover. Where is that debt limit at today?

tekhneek's picture

Took out $600 today for the weekend and my bills were numbered -- IK(...)601 through IK(...)630.

This is the third time in 2 months where I've pulled out cash and had consecutively numbered bills. I'm not sure if this is even a big deal or not but this hasn't happened to me before until now. Usually they're all over the place and aren't brand new. All say 2006 on them too. Or maybe I'm just being an alarmist but I can't help but think something's going on.

TruthInSunshine's picture

That sounds very odd to me, but then again, I'm not that familiar with the inner workings of the machinations behind the doors of Timmay Wonka's Fiat Factory.

pakled's picture

$600 for two days? I pull $40 at a time. I want to party with you....

smiler03's picture

This happens all the time in the UK. I would say 3 out of 5 times that I use an ATM I get brand new consecutively numbered notes, and that is as far back as I can remember.

In the UK our smallest denomination note is £5, they last for an average 9 months. According to Wikipedia a one dollar note is in circulation for an average 42 months! http://en.wikipedia.org/wiki/United_States_one-dollar_bill

Maybe they are replacing all denomination notes much sooner and have a much increased replacement plan in action?

SAT 800's picture

Does the green come off on your fingers? Just joking. No idea what it means; if anything.

Michelle's picture

Banks order much more cash to hold in their vaults over the holidays and the reason is simple - cash gifts. Seasonal phenomenon, happens every year. Don't read too much into it.

trav7777's picture

relax; I've seen that a million times.  More likely is that the bank has a different process for stocking ATMs than the counter.  They probably take cash in magazines or something for the new ATMs, instead of loading it themselves.

Amish Hacker's picture

It would take a miracle to bring back those foreign buyers of USTs. Like maybe a euro plunge, a Middle East war, and a Chinese housing market collapse. I wonder why no one else has thought of this...

TruthInSunshine's picture

The sell UST/buy into John Paulson and/or Barton 'Smally' Biggs trade is back on.

Disclosure:

<--- Longpork (or so they tell me)

Strut's picture

Totaly bearish. Soon you'll be paying them to tie up your $... Wait...

StychoKiller's picture

Ha!  I never get tired of that sword swallowing act...

Papasmurf's picture

Is the the smart money, or the dumb money?

 

ucsbcanuck's picture

Smart - treasuries are at an all time high -  dump now, while going is good. There is a USD crunch on.

gatorengineer's picture

Tyler you have it bass akwards.... The liquidation of these treasuries is what is artificially holding the euro up (Sell dollars buy euros), when this trade ends euro collapses.  Treasuries will actually drop when the crash hits (Euro) europe and Siemens and company moves the rest of their money to BAC and Citi, etc....

Buck Johnson's picture

Your correct, that is exactly whats happening.  It's no wonder that the Euro was stopped at the 1.20 and change mark and then came back up.  The Euro is getting to close to parity to the dollar and they needed to stop the slide.  Because if it got down to parity or less than parity (dollar worth more than the Euro), then it would drop even faster because people would be getting out of the Euro. 

non_anon's picture

call the plumber, the crapper is overflowing again!

Al Huxley's picture

Commercials are hugely short USD and short:long ratio for gold and silver is as low as I've ever seen it. Usually around 2:1 short to long, 3:1 at peaks for gold, now well under 2:1. The commercials are usually on the right side of these markets (since they own the markets and make the rules, hard for them not to be) so expect a big drop in USD and corresponding rise in PMs in the near future.

SAT 800's picture

Not convinced about the dollar; have no position. Long Silver from $27even basis Mar. agree the metals will continue present rally.

bahaar's picture

So everyone is selling UST because dollar is worthless.  I'd like to know what they're buying so I too could buy that.  Euros?  Ha Ha.  Yen?  Ha Ha.  RMB?  They can't even if they want to.  They won't even if they can.  World in my opinion, is in a Catch 22 situation.  

richard in norway's picture

korean won, dont ask me why!

SAT 800's picture

Not selling because dollar worthless; not worthless; pressing need for dollars to satisfy contracts written in dollars.

GMadScientist's picture

Keynes liquidity preference or Diamond-Dybvig bleed out?

 

 

Schmuck Raker's picture

Are they selling due to declining faith in the $/Treas.?

Or, because they need the cash?

I wonder.

SAT 800's picture

Selling because need dollars to settle accounts; (de-leveraging).

lolmao500's picture

They need cash... selling dollars to buy euros, as Tyler has said many times in the past. When there's no more dollars to sell to buy euros, euro collapses... money moves to the US... Yet more money for timmy and Ben to run deficits.

It'll only end when there's a better place to put money (Mars or the Moon) or the brainwashed ``investors`` man the fuck up and sell those treasuries to buy land, gold, silver, food, ammo and guns, whatever...

This whole scam will never end.

 

Alchemist's picture

ZH contiues to demonstrate an ignorant bias and misunderstanding of reserve accounting.. Things are fairly simple - look at China's capital account - it turned negative late last year.. that means that capital outflows are resulting in decrease of Chinese reserves.. So if they are losing reserves - they have to sell Treasuries.. However on teh other side the reserves are going somewhere else.. for teh sake of this example lets assume that capital outflows from China are going back to the US (makes sesne given outperformance of US assets) where the formerly china reserve cash ends up being parked at US banks which in its turn use the $ to buy treasuries.. So math is pretty simple - reserve changed hands and with that the ownership of treasuries with no impact on the market

Spitzer's picture

Chinese selling  of treasuries lowers the US's capital account surplus.

GMadScientist's picture

You have the cayukes to show your face with the Zooro crashing, Spitzer?

Tell us another bedtime story about how it will be the reserve currency in the end.

Eally Ucked's picture

We don't need very arcane accounting rules, we are simple people. Do we produce enough to pay for what we buy? is that clear question, or I have to go deeper into a little problem? Sorry I'm drunk

Maestro Maestro's picture

Wrong.

 

When the Chinese sell US assets, it means they are buying either other currencies (and foreign bonds), or commodities, or goods and services with the proceeds.  When there is more supply of a thing, its price goes down.  US Treasuries and US dollars eventually will go down in price relative to other currencies and hard assets for which they are being exchanged.

Bonds, currencies and commodities are part of "the market" so the market is impacted, in contradiction of your claim.  This is so even if you use the term "market" in the narrow sense of the bond markets only.

lunaticfringe's picture

The Bernank will just buy them. The CB has trillions just waiting for such a calamity. Nothing to see here. Move along.

Yen Cross's picture

  And so ( Zulu) -,   Trade begins where?

upWising's picture

Costa Rican colones
Botswana Pulas
Fiji Dollars 

theyenguy's picture

Bonds, BND, turned lower as the Global Government Finance Bubble burst, as World Government Bonds, BWX, entered an Elliott Wave 3 of 3 down. We are witnessing the beginning of the end of the AAA era. The most toxic of Municipal Debt, Michigan Municipal Bonds, MIW, has turned down. Investors have begun exiting US Government Treasuries, ZROZ, EDV, TLT. The chart of the 10 30 US Sovereign Debt Yield Curve, $TNX:$TYX, is steepening as reflected in the Steepner, ETF, STPP, rising, and the Flattner ETF, FLAT, falling. Long Maturity Bonds are now loosing money. Derisking turned Emerging Market Bonds, EMB, Leveraged Buyouts, PSP, Junk Bonds, JNK, HYG, lower. Global debt deflation has enabled the bond vigilantes to successfully sell all Treasury debt short. The world central banks are no longer in control of interest rates: the only result can be price inflation, that is inflation in the cost of thins purchaed, (this comes from one’s currency buying less of commodities which are priced in dollars), and this at a time when global growth is starting to fail. The world has passed through peak credit. The bill for ponzi credit created by the US Federal Reserve, the ECB, and Wall street, has come due. Richard Russell, publisher of Dow Theory Letters said in King World News interview, We are watching the greatest debt bubble in history about to deflate, and it won’t be a pretty sight. A steepening yield curve means a recession is coming to the US and a depression to the world. Regional trade will replace global trade. The new direction in globalization is regionalization.

Given that the seigniorage of fiat money has failed, the seigniorage of diktat must increase. Regional global governance is rising to replace sovereign nation states, as nations loose their debt sovereignty. Fate is passing the sovereignty to regional sovereign authorities, such as the EU ECB and IMF Troika, those of the CELAC Group, and China as it rules in Asia trade arrangements with Japan and the Shanghai Cooperative. Stakeholders will be appointed from industry, government and banking to manage commerce, credit and resources, critical to the region’s security and stability. Public private partnerships such as Macquarie Infrastructure, MIC, will take the lead in managing the factors of production. Canadian Energy Income Companies, ENY, and Canadian Oil and Pipeline Companies such as Enbridge, ENB, will for all practical purposes be regionalized, that is something akin to being nationalized. In Europe a fiscal union will rise to provide fiscal rule over countries that use the Euro, and the Bundesbank or the ECB will be established as Europe’s Bank. The Renminbi, that is the Yuan, CYB, will serve as Asia’s defacto regional currency. Banks in this Finviz Screener, around the world will all be nationalized, or better said, regionalized. Structural reforms, austerity measures, pension overhauls, reworked national wage contracts, dismissal of government employees, and debt servitude will be de rigueur. Life in the Euro zone will be characterised by collectivism, as statism rises to govern all. Libertarianism’s dream of Freedom and Free Enterprise are simply mirages on the Neoauthoritarian Desert of the Real. Martin Armstrong writes in Financial Sense Capital Controls Coming In The US.

Blano's picture

MIW has turned down?  Where? 

blindfaith's picture

1920's 1930's all over again.  Thank God they stopped teaching history in school.  One thing about all this, the Cath-o-lick church will ( as in the 30's) sit behind the sceens and collect while blood flows in the streets of europe.

suckerfishzilla's picture

The USD was 63 in March it's now at 81.25.  How can the USD rise while treasuries are being dumped at a record pace?