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

Zero Hedge ^ | 14 March 2014 | Tyler Durden

[Errant]

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

[GOPJ]

Testing a potential weapon?

When we devalue our dollar the folks who buy our Treasuries get a guaranteed loss. Until recently safety was a good trade-off... seems that perception has changed.

[pierrem15]

Wrong:

a)if the rates climb, the Fed will step in to buy the bonds, pushing rates down.

b)If the rates climb, the value of the bonds will fall and the foreigners will lose too much, which will also moderate the sell-off.

c) The increase in dollar reserves will also tend to drive down interest rates on dollars.

What will happen is that the dollar will fall more relative to the Euro, Yen and Yuan: look for gas prices and other commodity prices denominated in dollars to go up, as foreigners look to recoup their FX losses from the Fed's inflationary policies.

[Red Badger]

And into what? .....................

Rice...................................

[chud]

Hold on to your butts.

[Starboard]

Your response makes no sense. I said there would be significant implications for our own interest rates. You said “wrong” but then acknowledge twice that rates could climb. Very confusing. If you are confident that rates will fall, then you should put your money on it (go short).

[pierrem15]

I simply said if they began to climb, the Fed would intervene to keep them low, plus added some additional factors that would keep them low.

I didn't say they would fall, just that they would not rise (at least not anytime soon).

A smart bond trader could probably make some money on intraday futures trades, but that's about it. I just don't think the Fed will allow the market to move very much at all.

If the sell off continues, you could make money on FX, I would think, because some of the growing dollar reserves would need to be rolled over into local currencies.

[Mich Patriot]

I had not idea what your reply would be, but that made me laugh. Not a bad idea either, but the government(s) will eventually grab that too if SHTF. For the greater good, dontcha know.