The Fed’s own MBS holdings crashed by $15.163 billion in the second week after the announcement that they would be adding about $40B / month to the total for the unforeseeable future, shrinking their total to a figure not seen since late 2011, while on the other hand the foreign central banks added a big hunk of agencies and swung to a modest sell-off in treasuries. This doesn’t appear to make a lot of sense until you remember that one year ago saw the biggest one week cenbank dump ever in treasuries. One explanation for this apparent insanity could be that, as a year ago, we’re only a couple of days away from the end of the US government’s own fiscal year end, and there well could be urgent calls on official assets to migrate temporarily onto other balance sheets so as to pretty up annual reports that would otherwise look pretty grim. Once those other organizations smile for the cameras over the weekend a lot of stuff might just quietly return home to mama early next week. In the private sector a similar move is called “Repo 105”, but when governments themselves get up to such things perhaps it’s just the routine fooling of voters 🙁
This week’s Reuters report1 is, as usual, based on the weekly update from the NY Fed’s H.4.1 table site.2 Here is Doom’s updated CSV version3 of the agencies and treasuries foreign central bank holdings data set.
Treasuries ricocheted into a $4.457 billion loss.
Agencies gained $6.525 billion, which is almost exactly twice the size of last week’s sell-off.
*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 growth creeped up $2.068 billion.
Twist’s ratio graphs popped up.
The Setser numbers both surged higher on the anniversary madness.
Notes and References
: “Foreign central banks’ US debt holdings rise – Fed”, Reuters, September 27, 2012.