This week’s Reuters report¹ is, as usual, based on the weekly update from the NY Fed’s H.4.1 table site,² but, unusually, Reuters’ weather reporter takes the rather mild erosion in these numbers as cause for panic over the debt ceiling debate …

NEW YORK, July 28 (Reuters) – Foreign central banks pared their U.S. Treasuries and agency debt holdings in advance of the Aug. 2 deadline when the U.S. government is expected to run out of cash … If Washington fails to raise the statutory $14.3 trillion debt ceiling by next Tuesday, it will likely cause the United States to lose its AAA-rating, leading to downgrades on agency debt and mortgage-backed securities.

… which is all rather silly, because the debt number doesn’t even include the explicitly implicitly effectively of- course- they’re- standing- behind- it- because- otherwise- every- bank- in- the- world- will- fail- US government guarantee on agencies. Here is Doom’s updated CSV version³ of the agencies and treasuries foreign central bank holdings data set.

The Fed’s own holdings of MBS ticked down a further $6.897 billion and foreign central banks dumped US obligations too, but by less than half that modest amount. Nevertheless, the trend is looking more and more like a stall for the yellow treasuries line.

Treasury Debt dipped $2.695 billion, erasing about a quarter of last week’s gain.

Agencies again continued its losing streak at a further reduced pace with a drop of just $0.610 billion.

*Agen-FM: The dotted line is the foreign central banks’ Agency Debt holdings reduced by the level of the Fed’s own MBS holdings. Since the FRBNY itself is a lightly audited peculiar amalgam of foreign & domestic, central and private bank I think it might be useful to consider the hypothesis that for a while starting in January 2009 the Fed’s MBS holdings were being quietly deemed to be “foreign.” That is, for the first half of ’09 the dotted line seems more sensible than the red one.

The net of US obligations slipped $3.305 billion.

Twist’s ratio graphs ticked up marginally.

The Setzer treasuries number number plunged and the agencies number slipped a little bit. This chart is quite sensitive to year-over-year trends in foreign cenbank support.

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Notes and References

[1]: “Foreign central banks’ US debt holdings fall – Fed”, by Wanfeng Zhou, Reuters, July 28, 2011.

[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 (includes Fed’s own MBS holdings).

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