Oil exporters amass record U.S. bond holdings in crude price plunge

Reuters ^ | Mar 17, 2015 | Richard Leong and Gertrude Chavez-Dreyfuss

[thackney]

The collapse in crude oil prices may have reduced revenues of oil exporters, but it has not soured their appetite for U.S. government debt.

Saudi Arabia and other major oil exporters have increased their holdings of U.S. Treasuries to record levels in an effort to counter the effect of the 60 percent drop in oil prices in the last nine months.

Global financial assets such as U.S. Treasuries, corporate debt, and equities have benefited from soaring oil prices over the last decade as producers funneled their oil windfall into these markets.

With the dollar hovering near a 12-year peak against a basket of currencies, OPEC and oil exporters are hedging the drop in their oil income from profits on a rising greenback. Crude prices fell to a six-year low this week.

Oil exporters' holdings of U.S. Treasuries grew to a record $290.80 billion in January from $285.9 billion in December, according to U.S. Treasury data.

"There is a strong portfolio argument for oil producers to use long dollar exposure as a partial hedge against weaker oil prices, not to mention the need for dollar reserves to help protect dollar pegs," said Alan Ruskin, global head of currency strategy at Deutsche Bank in New York.

[thackney]

excerpted for Reuters

[ripley]

Question:

Is all this activity and moving around of assets nothing but a reaction to economic distortion and manipulation of the value of money by the powers that be?

Maybe a better question would be, is all this activity healthy or just economic bunker-building?

Just asking.

IMHO

[thackney]

Is all this activity and moving around of assets nothing but a reaction to economic distortion and manipulation of the value of money by the powers that be?

I don't understand that question.

Maybe a better question would be, is all this activity healthy or just economic bunker-building?

Do you mean, is OPEC and other nations that have significant oil exports buying our US bonds healthy?

They believe it is healthy for them. Is increased sales of US bonds healthy for us? Probably.

[South Dakota]

What happens when our dollar fails?
They who hold our fiat paper will want something tangible in return

[ripley]

Thanks for the response.

I often wonder what the shenanigans engaged in by certain members of congress will result in for the people they consider to be stupid, ignorant, moronic subjects.

IMHO