US/NATO War on Russia

[David Guyatt]

Foreigners Sell A Record Amount, Over $100 Billion, Of Treasurys Held By The Fed In Past Week

Submitted by Tyler Durden on 03/14/2014 10:51 -0400

http://www.zerohedge.com/news/2014-03-14...ys-held-fe

A month ago we reported that according to much delayed TIC data, China had just dumped the second-largest amount of US Treasurys in history. The problem, of course, with this data is that it is stale and very backward looking. For a much better, and up to date, indicator of what foreigners are doing with US Treasurys in near real time, the bond watchers keep track of a less known data series, called "Treasury Securities Held in Custody for Foreign Official and International Accounts" which as the name implies shows what foreigners are doing with their Treasury securities held in custody by the Fed on a weekly basis. So here it goes: in the just reported latest data, for the week ended March 12, Treasurys held in custody by the Fed dropped to $2.855 trillion: a drop of $104.5 billion. This was the biggest drop of Treasurys held by the Fed on record, i.e., foreigners were really busy selling.

Was that Russia transferring dollar holdings offshore?

By: Patti Domm | CNBC Executive News Editor

Published: Friday, 14 Mar 2014 | 3:05 PM ET

http://www.cnbc.com/id/101495837

The Fed's custody holdings report is usually a sleeper, but this week there was a whopping withdrawal by some central bank. And while there's no evidence, speculation is that it was Russia.

Foreign central banks' holdings of U.S. marketable securities fell in the week that ended Wednesday by a record $106.1 billion, and that was mostly Treasurys. The holdings of U.S. securities held by the Fed for other central banks fell to $3.21 billion, the lowest level since December 2012.

While traders say they suspect it was Russia, they don't know for sure, and it has not shown up on Russia's balance sheet.

However, Marc Chandler, chief Treasury strategist at Brown Brothers Harriman, said everything points to Russia, starting with the timing of Sunday's Crimean referendum and the potential for Western sanctions. He said rather than selling the Treasurys, Russia simply transferred them out of the U.S.

"Everything (Russian President Vladimir) Putin is doing is being extra cautious about retaliation, like bringing troops right to the Ukraine border," said Chandler. "The other reason I say it's most likely Russia is you look at the countries that have the largest reserves. It doesn't feel like it's China because China has enough on its plate."

Chandler said about half of Russia's foreign currency reserves are held in dollar-denominated instruments, and this would be about 80 percent of those dollar holdings. At the end of 2013, Russia had $138 billion in Treasury securities.

"It could be somebody else, but it does seem circumstantial just on the timing alone," said Chandler.

He also said there are precedents for this type of behavior by Russia.

He pointed to the birth of the Eurodollar marketdollars outside the U.S. In 1956, when the Soviet Union invaded Hungary, it feared the U.S. would retaliate with financial muscle, and Russia-based Narodny Bank shifted dollars from the U.S. and deposited them in its London branch, he noted.

I wonder if Putin was just concerned that the US would freeze Russian assets, hence what appears to be his decision to relocate them - probably again to London?