I’m more than usually over my head this week, what with the WSJ reporting that general foreign investor demand for treasuries had strongly rebounded in February,[1] but that yesterday T-bills sold off strongly.[2] What’s really bizarre was that last week’s foreign Treasury Debt buy was nearly the largest Doom has ever seen. Obviously that didn’t impress Mr. Market.
UPDATE: Brad over at CFR has now posted a long must-read analysis [7] on the issue.
Treasuries are the only US asset foreign investors still want, despite their low yields. Over the past 12 months, the US — rather amazingly — could have financed its trade deficit by just selling Treasuries. And nothing else. At least so long as Americans didn’t move large sums out of the US.
It didn’t impress the MSM team who’s following this story either, it would seem. This week’s Reuters report [3] was presented as totally routine. Heck, they didn’t even bother putting an individual by-line on the piece. (heh guys, maybe you should review the previous week’s Doom charts before you write those reports; after all, we did figure out the Fed table for this stuff by reverse-engineering your series — fair’s fair 
) Meanwhile, Brad’s on the job.[4] We’ll have to watch and see what he makes of this. The report was, as usual, based on the weekly update from the NY Fed’s H.4.1 table site.[5] Here is Doom’s updated CSV version of the agencies and treasuries foreign central bank holdings data set.[6]
Cenbanks bought $26.762 billion of treasuries last week, the 2nd largest figure in the approximately 480 weeks since the NY Fed started following agencies in Feb 2000. They sold a modest $4.307 billion of agencies, which accelerates a trend towards reduced holdings of the senior (mostly) GSE debt.
That agencies line is now starting to develop a barely discernable downwards bend, and the yellow T-bill line is again climbing strongly.
Twist’s ratios graphs head down a bit stronger this week on the huge boost to the denominator.
This week we do get divergence to Setser’s 52-week change graph.
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Notes and References
[1]: "Foreign Buying Rebounds: Appetite Returns for Long-Dated Securities, Treasurys", by Min Zeng, Wall Street Journal, April 16, 2009.
The latest data Wednesday from the Treasury Department showed that net foreign purchases of long-maturity U.S. securities totaled $5 billion in February, a reversal of $54.7 billion in outflows in January. Buying in Treasurys contributed to the rebound. Foreign investors bought a net $23.6 billion in Treasury notes and bonds in February, after buying $12.7 billion in January.
[2]: "Treasurys Down On Fed Buys, Stocks, Data, JPMorgan Offering", by Min Zeng, Wall Street Journal, April 16, 2009.
NEW YORK (Dow Jones)–Treasurys bowed to a wave of selling Thursday afternoon on disappointment from the latest round of Federal Reserve bond purchases, rallying stocks and competing supply from JPMorgan Chase & Co. (JPM).
[3]: "Foreign central banks’ Treasuries holdings rise – Fed", Reuters, April 16, 2009.
[4]: "The US doesn’t name China a currency manipulator", by Brad Setser, Council on Foreign Relations, April 15, 2009. [quote is a response to my off-topic comment in the thread below the article]
# April 16th, 2009 at 8:21 pm bsetser responds:
…john, I too noticed the big increase in custodial holdings.
[5]: "H.4.1 Factors Affecting Reserve Balances", Federal Reserve Statistical Release (weekly), Federal Reserve Bank of New York.
[6]: The updated data set as a Comma Separated Value (CSV) file is here.
[7]: "Reserve managers keep buying Treasuries …", by Brad Setser, Council on Foreign Relations", April 17, 2009.
