In Surprising Twist, Global Central Banks Dump A Record $335 Billion In US Debt In Past Year
by Tyler Durden
Aug 17, 2016 5:08 PM
On Sunday, when looking at the latest update of the Fed's custody holdings of Treasuries, we noted something troubling: the number dropped sharply, declining by over $17 billion, bringing the total to $2.871 trillion, the lowest amount of Treasuries held by foreigners at the Fed since 2012.
We added that "while TIC data released this Monday will give us some much needed, if substantially delayed, data on reserve manager activity as of June, the hypothesis is that OPEC countries such as Saudi Arabia are once again quietly selling Treasuries to raise cash in an environment of low oil prices and the consequent budgetary tightness."
After getting the Treasury International Capital (TIC) data, we can confirm that something strange is taking place in the US Treasury market, in fact something that is the complete opposite of what one would expect by looking at the relentless Indirect bidder demand in government bond auctions. Because, based on TIC data, foreign investors - both official and private - were sellers of $32.9 billion Treasury notes and bonds in June. Narrowing the selling down to just official entities, i.e. mostly central banks, but also SWFs and reserve managers, brings the total to $33.5 billion.
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In the first six months of this year, foreign central banks sold a net $192 billion of US Treasury bonds, more than double the pace in the same period last year, when they sold $83 billion.
China, Japan, France, Brazil and Colombia led the pack of countries dumping US debt.
It’s the largest selloff of U.S. debt since at least 1978, according to Treasury Department data.
“Net selling of U.S. notes and bonds year to date thru June is historic,” says Peter Boockvar, chief market analyst at the Lindsey Group, an investing firm in Virginia.
U.S. Treasuries are considered one of the safest assets in the world. A lot of countries keep their cash holdings in US government bonds. But with US government debt having DOUBLED during the Obama era, countries around the world are starting to think the US may NEVER be able to repayits debt and they want to get rid of it.