Foreign Central Banks and Their Rapid Sell-Off of U.S. Treasuries
Central banks are rapidly selling U.S. Treasuries, with holdings at the New York Federal Reserve dropping significantly. Although custody holdings skidded, official data indicates large January purchases. The situation illustrates a complex interplay of shifting holdings, fluctuating prices, and exchange rates, sparking speculation and close monitoring for May's data release.
Are central banks offloading U.S. Treasuries amid geopolitical tensions in the Middle East? While official data reveal a nuanced picture, foreign-owned Treasuries in custody at the New York Fed dropped to a 16-year low, suggesting aggressive selling.
Despite eye-catching declines in Fed 'custody' holdings, Deutsche Bank estimates show $60 billion in net selling by central banks over recent weeks. Contradictorily, U.S. Treasury International Capital data highlights minimal sales last year and substantial January purchases.
Factors like bond price fluctuations and the shifting of holdings to non-U.S. jurisdictions muddy the waters. China's nominal decline in Treasuries is partly due to state bank investments. Analysts await May's TIC data, amid slipping foreign treasury ownership amid ongoing market complexities.
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