Housing Doom no longer feels so alone following trends in foreign central banks’ net buys of US obligations. Early Thursday, Ambrose Evans-Pritchard of the Telegraph posted a story [1] speculating that the recent strong selling of US treasuries suggested a quiet dumping by the Chinese.
It’s especially good to have company this week, when both short and long term trends got knocked into a cocked hat. Foreign central banks, in a complete 180 degree turn from the previous week, bought a fair number of treasuries but sold even more agencies.[34] The agencies selloff was by far the biggest negative result we’ve observed since we picked up the series in early May. The pattern and change are a bit like the week that ended August 1st, but the difference between treasuries and agencies is much bigger.
Once again, thanks go to twist for the updated chart and graph.
The Reuters summary returned [34a] after an absence of only one week, but the writing style is sufficiently different that it would seem we’ve got a new copywriter. Housing Doom welcomes our new anonymous colleague, and is looking forward to their quirks and whatever subtle changes to the boilerplate might give us hints as to what they think of this fascinating statistical series. At the same time we wish our old friend well. We’ll miss those occasional divergences from the routine language of the weekly post.
The Fed said its holdings of Treasury and agency debt kept for overseas central banks fell $1.308 billion in the week ended September 5, to stand at a total of $1.981 trillion.
The breakdown of custody holdings showed overseas central banks bought $3.665 billion in Treasury debt to stand at a total $1.210 trillion.
The foreign institutions sold securities from government-sponsored agencies like Fannie Mae and Freddie Mac, subtracting $4.974 billion from their holdings, to stand at a total $770.8 billion.
The updated chart and graph are derived from the new Fed report.[34]
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Notes and References
[1]: "Is China quietly dumping US Treasuries?", by Ambrose Evans-Pritchard, Telegraph, September 6, 2007.
A sharp drop in foreign holdings of US Treasury bonds over the last five weeks has raised concerns that China is quietly withdrawing its funds from the United States, leaving the dollar increasingly vulnerable.
Data released by the New York Federal Reserve shows that foreign central banks have cut their stash of US Treasuries by $48bn since late July, with falls of $32bn in the last two weeks alone.
"This comes as a big surprise and it is definitely worrying," said Hans Redeker, currency chief at BNP Paribas.
[34]: "Federal Reserve Statistical Release H.4.1 Factors Affecting Reserve Balances"
August 30th report
Memo (off-balance-sheet items):
Marketable securities held in custody for foreign
official and international accounts(2,7) 1,979,353 – 7,058 + 300,473 1,982,579
U.S. Treasury 1,205,372 – 13,458 + 61,554 1,206,794
Federal agency 773,981 + 6,399 + 238,919 775,785
Securities lent to dealers 5,268 + 187 + 999 8,567September 6th report
Memo (off-balance-sheet items):
Marketable securities held in custody for foreign
official and international accounts(2,7) 1,980,195 + 842 + 299,823 1,981,271
U.S. Treasury 1,207,179 + 1,807 + 62,532 1,210,459
Federal agency 773,016 – 965 + 237,291 770,811
Securities lent to dealers 5,886 + 618 + 2,587 7,1701,981,271 – 1,982,579 == -1,308
1,210,459 – 1,206,794 == 3,665
770,811 – 775,785 == -4,974
[34a]: "Foreign c.banks buy Treasuries, sell agencies – Fed", Reuters, September 6, 2007.
Foreign central banks were net buyers of U.S. Treasuries last week but overall decreased their holdings of U.S. debt through sales of agency securities, Federal Reserve data showed on Thursday.
The Fed said its holdings of Treasury and agency debt kept for overseas central banks fell $1.31 billion in the week ended Sept. 5 to total $1.981 trillion.
The breakdown of custody holdings showed overseas central banks bought $3.67 billion in Treasury debt, increasing their total to $1.210 trillion.
However, the foreign institutions sold securities from government-sponsored agencies such as Fannie Mae (FNM.N: Quote, Profile, Research) and Freddie Mac (FRE.N: Quote, Profile, Research), subtracting $4.97 billion from their holdings, to stand at a total $770.8 billion.
