Russia Liquidates Its US Treasury Holdings

Last month we showed that as Trade Wars began in April, the world's central banks and other official institutions dumped more Treasuries than in any month since January 2016, some $48.3BN, perhaps over concerns of others selling first, and precipitating a sharp move higher in yields. Fast forward one month later to May, when according to the latest just released Treasury International Capital (TIC) update, in May the selling of Treasurys by official entities continued, with another $24BN sold in the month of May, when yields continued to rise and eventually hit the 2018 highs of 3.11%.

But while the selling of Treasuries was to be expected - after all someone had to sell aggressively to push yields sharply higher in April and May - the question was who.

What we showed last month, is that contrary to some speculation, it wasn't Beijing, because after shedding a modest $6BN in April, China actually bought $1.2BN in Treasurys in May, leaving its holdings largely unchanged over the past month.

And while Japan did sell $12BN in TSYs in April, it more than made up for its in May when it purchased $17.5BN, bringing its total to $1048.8BN in May, which means that over the past two month, Japan was a net buyer of US paper.

Meanwhile, the third most prominent holder, hedge funds, aka "Cayman Islands", bought for a second consecutive month, adding another $5BN.

* * *

So if the usual suspects were buying, who was selling?

Here is the answer.

Readers may recall that last month we first reported  that for all the confusion about sharply higher yields in April, the explanation was simple: it was Vladimir Putin who liquidated a whopping half of Russia's Treasury holdings, which declined by $47.4BN to just $48.7BN - the lowest since 2008 - from $96BN in March.

But wait, it gets better, because as Trump continued to jawbone about more sanctions targeting Russia, Putin did not stop and in May he continued what was an outright liquidation of Russia's TSY holdings, which plunged by another $40BN, or 82%, from $48.7BN to just $9BN in May. Keep in mind this was over $100BN at the start of the year.

It appears that When Putin warned he would diversify Russia's state reserves  -out of Treasurys - he was serious.

And this is what a very politically motivated liquidation of Treasury holdings looks like.

In other words, in just two months, Russia sold a whopping $81BN in treasurys, a liquidation flow that was likely responsible for much if not all the blow out in rates over the period. Because what else happened as Russia was liquidating 85% of its Treasury holdings in 2 months? 10Y yields soared from 2.7% at the start of April to the 7 year high of 3.11% in late May.

At that point, yields tumbled again as traders freaked out over Trump's escalating trade war with China, and proceeded to rush into deflationary safety. 

So just like last month, we can't help but wonder - as the Yuan-denominated oil futures were launched, trade wars were threatened, and as more sanctions were unleashed on Russia - if this wasn't a dress-rehearsal, carefully coordinated with Beijing to field test what would happen if/when China also starts to liquidate its own Treasury holdings.


Free This Cryptopithicus Homme Tue, 07/17/2018 - 18:05 Permalink

Why hold worthless paper? When do we start selling 1,000 year paper? - hint - we ain't paying this bitch down!

US govt debt $21+ trillion add private debt $70+ trillion add $113+ trillion unfunded liabilities (future debt SS, M'care, etc) who be paying dat debt??? you, me, all of us? LOL

Then there is a quadrillion in derivatives...

Social unrest all over the place...

.gov malfeasance....

can you say tinder box?

The shit storm approaches.


In reply to by Cryptopithicus Homme

MoreSun nmewn Tue, 07/17/2018 - 19:56 Permalink

Trump succumbs once again to the screams of the jew supremacist machine. What happened to "America First" Trump. You keep on proving it's jewmerica first.

Yes bring back the 1935 Nurenberg Laws in full force. Yes Hitler has been proven right, time and time again. History will always eventually bear out the truth. And you murderous jew supremacists know it.

so-called israel allows no other but self described jews to become citizens, they murder/genocide Palestinians every day. Your in the process of expelling all blacks from your so called democracy, & built a giant wall.

All the meanwhile your tribe members in jewmerica gave us the 1965 immigration act and screamed "open the flood gates", you fight tooth & jew nails to stop the Republic from enforcing their immigration laws and from building the wall.

Remove all jew supremacists from all positions of power-NOW!!!

In reply to by nmewn

Boxed Merlot Four Stop Wed, 07/18/2018 - 17:05 Permalink

...breakdown of who owns the treasury market...

Interesting article, the note regarding Ireland being #3 is cute. Taxes will always be the nemesis to making/keeping profits. While the interest is negligible, using the tool as a repatriating device in lieu of waiting for some "olie olie auction free" moment in the future when some act of Congress allows for a "one time" event to bring it home only makes sense.

Money changers. So, if you're an up and coming attorney in the wings your two best options are the FBI and GS, (and not necessarily in that order), right, Mr. Comey?

In reply to by Four Stop

css1971 vaporland Wed, 07/18/2018 - 03:25 Permalink

You are missing that its not a one time deal, but a lifestyle choice.

It dpends how you can sell new ones in the future. If your promises are shit today then fewer people gonna queue up to buy your shiny new ones.

It reflects on the coupon you can put on them. From the sellers point of view a zero coupon would be just awesome and negative coupons.... well that noise is Treasury officials beating off.

In reply to by vaporland

withglee vaporland Wed, 07/18/2018 - 09:49 Permalink

does the US treasury really care what anyone does with a t-bill once it's sold?

If those foolish enough to buy them then get rid of them at a loss, it affects Treasury's success in doing its next rollover ... i.e. next default on its trading promises. So their treasuries sell for less and less and less ... and the dollars you hold trade for less and less and less ... it's called inflation. It is what sustains all governments. And taxes? It is what collects tribute (interest) for the money changers who institute the governments that protect their scam.

Iterative secession. Let those who like that game have it in their space ... and not be in my space.

Institute a competitive "real" money process that "guarantees" perpetual zero inflation; perpetual free supply of money to responsible traders; and elimination of irresponsible traders with a responsive negative feedback system ... i.e. defaults are met immediately by interest collections of like amount. Their process can't win. It can only tie.

It's really very simple and requires no government or state at all.

In reply to by vaporland

mkkby ebear Wed, 07/18/2018 - 03:41 Permalink

It could mean they are fighting against ruble devaluation.  I suspect that if oil doesn't stay high they will have big problems.  Remember that is why obama was pressuring saudi to pump more oil.  It was to bankrupt russia.

Stay tuned.  We do indeed need to see the other side of the trade.  ZH has slipped from doing good financial stories.

In reply to by ebear

rex-lacrymarum mkkby Wed, 07/18/2018 - 11:45 Permalink

I think it has to do with actually getting out of the USD, as the US has control over SWIFT and the threat of fucking Russia over with the payments system continues to hang in the room, like a really bad-smelling wet Brennan fart. Russia's central bank has been buying gold with the proceeds from treasuries so far, which feels like a preparation for Iran-like economic isolation or even something worse. I believe the belligerence of the US Deep Staters is genuinely scaring them, and they don't believe Trump is actually in control of things - besides, they probably don't trust him anyway, since you can never tell if he means what he says (remember how he praised Xi Jinping to the rafters, and now there's a full-scale trade war on). 

I would actually say that this is a very worrisome development. It's telling me that Russian security services and the government believe that tensions are going to be taken up by several notches - and this assessment is likely based on some intelligence they have which we are not privy to. 

In reply to by mkkby

Free This MoreSun Tue, 07/17/2018 - 20:07 Permalink

Come on man, I already slapped you down once, shall I do it again?

My uncle fought from Normandy to the Elbe (I have his battle map), and he saw the death camps, stick bodies piled high, skulls in the ovens, he wrote home about it all. He died fighting nazi's...

I will take his word over yours and any another nutter out there!

You are the hoax, fuck off!

Springtime in Germany for Histler!!! goose step to that why don't ya! moron.

In reply to by MoreSun