From this week’s Reuters report,[1] it’s obvious that foreign central banks in the aggregate made a huge and significant move in their net holdings of US obligations — treasuries and agencies. This news comes from FRBNY’s weekly statistical release H.4.1 [2] and Doom has again added the last week’s data to our CSV file going back to early 2000.[3]
The grand total change in US obligations held by foreign central banks rose a microscopic $4 million [$0.004 billion] last week, but the big news was that they collectively sold a record-shattering $24.4 billion in agencies and bought an equal amount ($24.4 billion) of treasuries. Perhaps that new explicit guarantee on Fannie’s and Freddie’s senior debt needs to get a bit expliciter 
In any case, if Hank wants to buy mortgages, I think we may have found a few folks who want to offload some, big-time. Looking at the data set, that $24.4 sell-off reverses the last 19 weeks of net agencies perchases, going back to late May. To assist Doomers in capturing the historic proportions of last week’s action, twist has prepared the bar-graph for the last 10 weeks’ worth of net agencies buys, and the top-10 list of all-time moves (plus / minus).
TOP 10 Biggest Agency Purchase/Sale Moves
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Although overshadowed a bit by last week’s all-time record buy, this week’s $24.4 billion treasuries purchase wins the Bronze Medal, being the 3rd biggest since the Fed started publishing the series in February 2000.
Foreign cenbanks have had an impressive appetite for no risk / no yield assets lately.
Top 10 Biggest Treasury Purchase/Sale Moves
Doom’s trusty ratio graph falls off a cliff on last week’s action.
And when you go all the way back to Feb 2000 it gets pretty dramatic. Check out the cute hockey stick pattern emerging …
Finally the absolute values graph is starting to look like the cloud-chamber picture from some particle accelerator experiment. That repulsion looks positively electro-magnetic.
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Notes and References
[1]: "Overseas cenbanks’ Treasuries holdings rise-Fed", Reuters, October 9, 2008.
Foreign central banks’ holdings of U.S. Treasuries at the Fed increased by $24.443 billion in the week ended Oct 8 to $1.538 trillion.
Their holdings of agency securities fell.
Such holdings of these securities issued or guaranteed by Fannie Mae and Freddie Mac dropped by $24.439 billion to $944.802 billion in the week ended Oct 8.
[2]: "H.4.1 Factors Affecting Reserve Balances", Federal Reserve Statistical Release (weekly), Federal Reserve Bank of New York.
[3]: The updated data set as a Comma Separated Value (CSV) file is here.
John-
How do you think this will affect the plan for the government to buy up and/or refi bad mortgages?
twist -
I call it a strong positive — an almost inexhaustible supply of mortgages to buy back
“Pathetic,” says Igor, who doesn’t seem to have much of a sense of humour today.
It’s not the ratings of the Agency debt, its the duration. Most GSE debt has a current duration of at least 9 years. Most everyone is fleeing to short term debt right now (less than 6 months). When this financial crisis ends, expect huge investments back into Agency debt, adjusted for the probably tsunami of inflation likely to come of all this. IMOHO we will be back to 8% mortgages in a few years.