NEW YORK, June 29 (Reuters) – The New York Federal Reserve said on Monday it will buy agency coupon securities maturing from Jan. 2016 to July 2032 in an open market operation on Tuesday. [1]

America’s a great country.  Unique too.  Part of that exceptionalism is that it’s the only decent sized country on the planet that doesn’t actually have a central bank.  If my garbled understanding of US history is any guide, they tried having one a couple of times, but public opinion, driven by Andrew Jackson era populism, made the project impossible.  Then 99 years ago a cabal of Georgia duck hunters, reacting to the near-death-experience of Ye Panicke of 1907, created the Fed as a sort of pretend replacement.  Congress, in obvious violation of key provisions of the Constitution (not to mention the annoyance of a century’s worth of conspiracy theorists) continues to give the thing sufficient privileges to maintain the joke.  It’s not obvious that America’s lawmakers have a choice.

But the Fed is, among other things, a chain of privately held banks.  The ownership isn’t exactly transparent, but seems to be based around a group of retired Ruritanian diplomats, stiffened with lashings of the sort of European aristocratic riffraff that’s in the habit of doing deals around the less brightly lit tables at the cushier sort of IOC banquet.

So that, stories like the above-quoted, and what seems to be an accelerating trend towards ever more opaque numbers coming out of official US financial sources is leading me to semi-seriously start considering the following question: Is it possible that bits of the Fed are now being labeled "foreign" for statistical purposes?

Yes I know it’s a ridiculous idea, but it’s the only means I can think of by which the wonky numbers we’ve been following here make any sense at all.  I’m guessing that one Brad Setser alternative explanation would be that foreign authorities have a heck of a lot more appetite for treasuries and agencies than they admit in public.  Do Doomers think that, or anything else, would fly?  Frankly, I’m at a loss.

Anyway, Twist is still on Jay Gatsby’s front lawn munching crab cakes (tough life) and waiting for Mr. Internet Guy.  Until connection is restored everyone’s going to have to imagine the charts.  Wait till you see the size of that yellow bar for last week’s t-bills!

Speaking of which, perhaps Chris Reese and the gang should wake up and smell the history. Their blandly worded weekly Reuters report,[2] didn’t so much as use a word like "surge," but it recorded the 3rd largest increase in Treasury Debt holdings by foreign central banks since they started splitting out the agencies number in February 2000. 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]



In a startling turn-around, treasuries holdings increased by a massive $28.965 billion, now the new #3 result in our data set. Meanwhile agencies sagged an additional slight $1.061 billion.

Agency Debt holdings have now been suspiciously flat for exactly half a year, with the total change in that time a measly $9.227 billion drop

Twist’s ratios graphs dropped due to the huge treasuries buying spree.

Looks like a final bit of divergence for Setser’s 52-week change graph.

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Notes and References

[1]: "N.Y. Fed to buy agency coupon securities Tuesday", by Richard Leong, Reuters, June 29, 2009.

[2]: "Foreign central banks’ US Treasury holdings up-Fed", by Chris Reese, Reuters, July 2, 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.