Swiss Finance Minister Hans-Rudolf Merz said on Thursday UBS had no choice but settle a tax fraud case with the United States to avoid being brought on its knees and threaten the entire Swiss economy. [2]
I have a sense that the foundations of the world are coming unstuck this week. Yesterday Citi’s stock lost almost 14 percent and its debt got hammered by an off-hand analyst’s comment,[1] America was busy launching the financial equivalent of a nuclear first strike [2] against Switzerland of all places and Google traces indicated an ongoing coverup [3] of an impending financial meltdown in Eastern Europe. Adding to the angst on that last one was ominously ambiguous [4] [5] reporting and analysis on the East European threat coming out of The Economist even as Bloomberg was turning up the heat.[6]
Furthermore, conditions in Halifax Thursday afternoon were really yucky 
… and speaking of stormy weather, there were clear signs Wednesday that the Fed is considering censoring the cenbank holdings statistics we have been following. However, they were still in place this week with this week’s Reuters report [7] furiously downplaying the significance of a week where the headline $11.223 billion total obligations buy popped up just a bit from last week’s healthy figure. What the powers-that-be presumably didn’t want Reuters’ readers to notice was the wild swings contained in the treasuries and agencies components. The report was, as usual, based on the weekly update from the NY Fed’s H.4.1 table site.[8] Here is Doom’s updated CSV version of the agencies and treasuries foreign central bank holdings data set.[9]
The components each lurched around $12 billion from last week’s balanced result, the treasuries buy surging up and the agencies holdings change collapsing into a hefty dump. Central banks gorged on $17.423 of Treasury Debt, just a bit out of Doom’s Top Ten list, and sold off $6.20 billion of Agency Debt. This is a reversion, at least for this one week, to the pattern we saw in the second half of 2008. Maybe East Asian investors thought recent manipulative efforts to support the semi-nationalized GSEs [10] were starting to sound uncomfortably similar to one of last fall’s less successful efforts to provide temporary relief to credit markets.[11] 
The stuttering ends of the raw-numbers graph diverged in the last 7 days.
Twist’s ratios graphs herald the possible resumption of the familiar downward trend.
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Notes and References
[1]: "Citigroup bonds weaken on analyst comment", by Karen Brettell, Reuters, February 9, 2009.
[2]: "Swiss FinMin says UBS was forced to settle with U.S", by Jonathan Lynn, Reuters, February 19, 2009.
[3]: "The Looming Collapse of European Banking", by Gary North, Global Research, February 19, 2009.
The banking system of Europe is at the edge of the abyss. A brief story by The Telegraph revealed this last week. The original was almost immediately deleted. A new version was substituted.
[4]: "Argentina on the Danube? Europe is facing nightmarish problems in its east. With help from the West, meltdown can be avoided", Economist, February 19, 2009.
[5]: "The ties that bind: Will west European banks abandon their eastern subsidiaries?", Economist, February 19, 2009.
… Moody’s, a credit-rating agency, says it has “concerns” about the “supportiveness” of western parent banks to their local subsidiaries, the liabilities of which they do not typically guarantee. In a simplified scenario, a western bank facing life-threatening losses could just walk away, limiting the hit to a write-off of the equity it had invested in the subsidiary.
[6]: "Germany, France May Face Bailout of Nations, Not Just Banks", by Emma Ross-Thomas, Bloomberg, February 18, 2009.
“When push comes to shove Germany, France, the larger players will bail out those smaller peripheral players,” said Alex Allen, chief investment officer of Eddington Capital Management. “You can’t let one part of the system fail because it leads to failure of the whole system.”
[7]: "Foreign central banks’ U.S. debt holdings rise", by Burton Frierson, Reuters, February 19, 2009.
[8]: "H.4.1 Factors Affecting Reserve Balances", Federal Reserve Statistical Release (weekly), Federal Reserve Bank of New York.
[9]: The updated data set as a Comma Separated Value (CSV) file is here.
[10]: "Signs of success in Fed’s Fannie, Freddie programs", by Kristina Cooke and Lynn Adler, Reuters, February 19, 2009.
Thursday’s purchases bring the total agency debt the Fed has bought so far to $32.89 billion. On the agency side, the Fed in the past week bought $19.9 billion in agency mortgage-backed securities, MBS, bringing the total bought so far to about $135 billion.
"That takes pressure off of home owners from an economic standpoint because they get to lower their monthly mortgage payments for those who can qualify. That’s a big caveat," Caron said. "Theoretically this should also make housing more attractive."
[11]: "Fraternity In Danger Of Losing House Launches Harebrained Scheme To Fix Economy", The Onion, November 17, 2008.
"The moment we got the bad news, we knew there was only one thing we could do," said Theta president Peter "Cool Pete" Barrow. "Sneak into the Federal Reserve Bank with two cans of Barbasol and a giant fishing net in order to adjust the overnight lending rate while no one is looking."
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