Foreign central banks were net strong net buyers of US obligations in the week ending September 19. They bought both treasuries and agencies, with treasuries and the total result both being the strongest we’ve seen since starting following the data series from early April. With the US dollar steadily losing value against most foreign currencies during this week, this blogger at least is in pretty total confusion as to what this means. Just yesterday there was a story [99] about how foreign appetite for US paper had been very weak in July. Oddly, the Reuters report [36a] gave no context at all, keeping strictly to their dullest boilerplate. Furthermore, Google News did not bring up the report, and we had to dig it out using the search function on the Reuters site. Is this falling off the table accidentally, or is someone interested in keeping the wild gyrations of this series from attracting attention?

Once again, twist to the rescue with graph and chart.

The Fed said its holdings of Treasury and agency debt kept for overseas central banks rose a whopping $17.336 billion in the week ended September 19, to stand at a total of $1.995 trillion.

The breakdown of custody holdings showed overseas central banks bought $12.710 billion in Treasury debt to stand at a total $1.216 trillion.

The foreign institutions also bought securities from government-sponsored agencies like Fannie Mae and Freddie Mac, adding $4.625 billion to their holdings, to stand at a total $779.1 billion.

The updated chart and graph are derived from the new Fed report.[36]

 

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Notes and References

[36]: "Federal Reserve Statistical Release H.4.1 Factors Affecting Reserve Balances"

September 13th report
Memo (off-balance-sheet items):
Marketable securities held in custody for foreign official and international accounts(2,7) 1,981,321 + 1,126 + 299,191 1,977,916
U.S. Treasury 1,207,142 – 37 + 59,493 1,203,489
Federal agency 774,180 + 1,164 + 239,699 774,427
Securities lent to dealers 5,519 – 367 + 1,623 3,258
September 20th report
Memo (off-balance-sheet items):
Marketable securities held in custody for foreign official and international accounts(2,7) 1,987,499 + 6,178 + 314,060 1,995,252
U.S. Treasury 1,210,997 + 3,855 + 78,514 1,216,199
Federal agency 776,502 + 2,322 + 235,546 779,052
Securities lent to dealers 2,177 – 3,342 + 1,646 2,613

1,995,252 – 1,977,916 == 17,336

1,216,199 – 1,203,489 == 12,710

779,052 – 774,427 == 4,625

 

[36a]: "Foreign central banks net buyers of U.S. debt – Fed", Reuters, September 20, 2007.

Foreign central banks were net buyers of U.S. Treasuries last week, Federal Reserve data showed on Thursday.

The Fed said its holdings of Treasury and agency debt kept for overseas central banks rose $17.34 billion in the week ended Sept. 19, to stand at a total of $1.995 trillion.

The breakdown of custody holdings showed overseas central banks bought $12.71 billion in Treasury debt to stand at a total $1.216 trillion.

The foreign institutions bought securities from government-sponsored agencies like Fannie Mae and Freddie Mac, adding $4.63 billion to their holdings, to stand at a total $779.05 billion.

 

[99]: "Foreign appetite for U.S. assets weakens", Bloomberg / Chicago Tribune, September 19, 2007.

Foreign buying of U.S. financial assets slowed in July to the weakest pace in seven months, as a rout in the subprime mortgage market tempered international demand for American bonds.

Total holdings of long-term equities, notes and bonds rose a net $19.2 billion, down from a revised $97.3 billion in June, the Treasury Department said Tuesday.