In Unexpected Twist, Saudi Arabia Was Buying US Treasuries Over Past Year

As reported earlier after decades of keeping Saudi Arabian holdings of treasury paper non-public and bundled with those of other "oil exporting nations", today at 4pm for the first time the US Treasury confirmed that its "leaked" look at Saudi holdings, exposed as a result of a Bloomberg FOIA, was accurate when it reported that the Saudis owned $116.8 billion in US paper as of March 31, which made the country the 13th largest holder of US Treasurys.

 

What is far more surprising, as this data was already revealed earlier, is that in the past three months Saudi holdings barely declined, and according to the Treasury, dipped only from $124BN in January to $117BN in March, which represents far smaller selling than what many sellside analysts had expected as a result of Saudi reserve liquidation. In fact, at $116.8 billion, Saudi holdings are above the November total of $114.7BN which was the highest going back all the way to March.

In other words, instead of selling US Treasuriess, Saudi Arabia appears to have been buying over the past year!

 

In addition to this unprecedented disclosure, which comes at an odd time for the US Treasury, and perhaps serves to diffuse fears that Saudi Arabia holds up to $750 billion in TSYs (which it still may via custodial holdings), there was little notable to update among the top Treasury holdings for the month of March:

  • China held $1.24TN of U.S. Treasuries, a decrease of $7.7BN from last month
  • Japan held $1.14TN, an increase of $4BN from last month
  • The Cayman Islands (a proxy for hedge funds) held $265.0BN, an increase of $10b from last month
  • Ireland held $264.3 BN, an increase of $8.8BN from last month
  • Russian holdings dropped to $86.0BN, a decrease of $1.6b from prior month and the lowest since October of 2015

Curiously, infamous Belgium held $153.8b of U.S. Treasuries, an increase of $10.8b from prior month, and as the chart below shows, China may once again have begun to accumulate TSY positions via Belgium.

 

Looking away from just Treasurys, a notable if unexpected finding in the TIC report, is that in March foreign investors swarmed into US fixed income products adding $23.6 billion in total long-term TSYs, $32.3 billion in Agencies, and $25.3 billion in corporate bonds between public and private investors.

 

Curiously, in the month when stocks were soaring, it wasn't just the smart money that was dumping US equities: so were foreigners, which they did to the tune of $16.5 billion between official and private entities. This is the opposite of what one would expect based on the market action.

 

In short: either the TIC data is once again woefully incorrect and pending a major revision, or everything that the public has been spoonfed about fund flows in the first several months of the year has been incorrect.