"If you buy U.S. Treasuries, then there’s at least a fighting chance that you’ll get your money back." – dealer [1]

Sorry, Doomers, but on a Thursday when just about everything else was depression-city, the NY Fed numbers we have been following were casting an almost unique ray of light :)

UPDATE: Once again, Brad’s got further info and charts at this must-read CFR post.[5]

…

But the fact that Russia explicitly indicated its sovereign fund would shy away from illiquid Agencies is news. It underscores that most sovereign investors — sovereign funds as well as central banks — are shifting into the Treasury market. And it also highlights just how amorphous the distinction between sovereign wealth funds and central bank reserves really is.

LATER: Brad’s CFR friends have come up with a 13-week-change version of his 52-week-change chart that zooms into the present situation nicely. This looks like an important trend to follow in the coming weeks.  His latest analysis [6] is also very illuminating and contains lots of good stuff beyond this initial explanation.

 

There has been a lot of chatter recently about the risk that foreign central banks would lose their appetite for Treasuries just as the US stepped up its issuance. The Fed’s custodial data, though, isn’t sending any warning signals. The CFR’s Paul Swartz calculated the 13 week (think 3 month) increase in central banks’ custodial holdings at the New York Fed.

The above seems to be just the sort of thing foreign central bankers want to hear these days. This week’s Reuters report [2] showed the cenbanks feeding on agencies and (especially) treasuries at a rate of nearly $3 billion a day. That’s much better than the $1 billion a day pace set over the previous 2 months, and much closer to the rate of uptake needed to support Obama’s various stimulus packages. The report was, as usual, based on the weekly update from the NY Fed’s H.4.1 table site.[3] Here is Doom’s updated CSV version of the agencies and treasuries foreign central bank holdings data set.[4]

Both components about tripled week-over-week. Cenbanks bought a lusty $15.842 of treasuries, and a respectable $3.423 billion of agencies, yielding a combined total of $19.265 billion, or about $2.75 billion a day.

Both components of the raw numbers graph accelerated up this week, again with minor divergence.

Twist’s ratios graphs continue down, very slightly faster than last week because of the large treasuries buy.

Meanwhile, Setser’s 52-week change graphs are still sputtering around trying to find a new trend.

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Notes and References

[1]: "Treasuries Rise as Stocks Fall, Traders Bet on Fed Purchases", by Susanne Walker, Bloomberg, March 5, 2009.

[2]: "Foreign central banks U.S. debt holdings rise-Fed", by Burton Frierson, Reuters, March 5, 2009.

[3]: "H.4.1 Factors Affecting Reserve Balances", Federal Reserve Statistical Release (weekly), Federal Reserve Bank of New York.

[4]: The updated data set as a Comma Separated Value (CSV) file is here.

[5]: "Russia says no to the Agencies …", by Brad Setser, Council on Foreign Relations blog, March 6, 2009.

[6]: "Central banks are still buying large quantities of Treasuries", by Brad Setser, Council on Foreign Relations blog, March 7, 2009.