Foreign cenbanks net sellers of U.S. debt - Fed

Reuters ^ | Thu Mar 16, 2006 4:30 PM ET | Reuters

[AdamSelene235]

NEW YORK, March 16 (Reuters) - Foreign central banks were large net sellers of U.S. debt in the latest week, with hefty sales of Treasury debt overwhelming purchases of U.S. agency securities, Federal Reserve data showed on Thursday.

The Fed said its overall holdings of Treasury and agency debt kept for overseas central banks fell $10.299 billion in the week ended March 15, to stand at $1.588 trillion.

The breakdown of custody holdings showed overseas central banks sold $16.691 billion in Treasury debt, but bought $6.390 billion in securities from government-sponsored agencies like Fannie Mae (FNM.N: Quote, Profile, Research) and Freddie Mac (FRE.N: Quote, Profile, Research).

Overseas central banks, particularly those in Asia, have been huge buyers of U.S. debt in recent years, and now own over a quarter of marketable Treasuries.

The full Fed report can be found on:

http://www.federalreserve.gov/releases/h41/

Marketable securities held in custody by the Fed for foreign official and international accounts (in millions of dollars):

Week to March 15 vs prior wk vs 2005 wk

Total 1,588,293 -10,299 +199,605

Treasury debt 1,125,006 -16,691 + 37,123

Federal agency 463,286 + 6,390 +162,480

Average of daily custody holdings

Week to March 15 vs prior wk vs 2005 wk

Total 1,594,966 + 3,260 +210,027

Treasury debt 1,133,573 - 3,028 + 48,425

Federal agency 461,393 + 6,287 +161,602

[BurbankKarl]

Are you saying this is the start of the global economic wars?

[Enterprise]

Bump

[furquhart]

Doubtful.

As others have pointed out, the total Chinese holdings of US securities total a few hundred billion. Such matters can be dealt with, if necessary.

Even the total US debt isn't as bad as it looks. A large chunk of it is simply notionally owed by the US Government to itself.

[Mind-numbed Robot]

And??

Seems to me that money is just being shifted from one place to another, all still US Treasury instruments, for a better yield.

[philetus]

If the gov didn't have a huge debt, we'd all want a raise.

[staytrue]

A large chunk of it is simply notionally owed by the US Government to itself.

And a large chunk of it is not owed to itself. Further the chunk that is owed to itself is in "trust funds" that are seriously underfunded.

[Lancer_N3502A]

I myself have been trying to hunt down facts and figures on exactly what the US owes and to whom; and who owes us what and how much. Can anyone help?

[Iris7]

My favorite liquidity indicator showed that, starting exactly when Katrina hit, the Feds started spending a lot of money.

Enough money was spent to depress short term interest rates dramatically. We are talking tens of $Billions to over a $hundred billion.

The Federal Reserve has since been removing the excess liquidity (inflation signs are rather bad) by open market operations and Fed Funds rate increases. The current inverted yield curve is the result.

What I am trying to show is that the "National Debt" has only a mythical reality. Likewise, taxes are not necessary to "fund the Government" but are used to decrease liquidity and/or punish political enemies. Perhaps they also serve to reassure folks that the Government needs them.

Government debt and, say, your personal debt are related in name only. Government has any income it wishes and can pay any debt is has at any instant and in full. This is not the case for you or me.

The idea of "government debt" is a holdover from the old specie money days when government had to tax in order to have income. The printing press is much easier, eh?

[Iris7]

The information you desire is not available to anyone except as an estimate (wild assed guess). Most Federal obligations are being used as a form of something like "collateral", as a fungible asset used in financial contracts.

Federal obligations are like your house - who owns it, really? You? Miss a few payments and find out. The house is collateral, and has a lien against it, for money loaned you. Who owns the stream of house payments you make? Who owns them now and who will own them in the future? The bank? Fannie Mae? Wall Street? The guys who have bought tranches in synthetic mortgage collateralized obligations? The "Chinese"? Really, your question has almost no meaning.

Another way to look at it is that Federal Debt is simply currency that pays interest, just as the greenbacks in your wallet is Federal Debt that pays no interest.

Money is funny stuff. Modern money is even funnier stuff. A most interesting bit of history is the development of "Central Banking".