 "More than $100 bn worth of US Treasury holdings just vanished. Is Russia responsible?")
This is making big news among investors this weekend.
According to Federal Reserve data, there has been a steep drop of $105 billion in US Treasury holdings held by foreign official and international accounts (basically central banks) at the Federal Reserve.
That is the biggest weekly drop ever.
The interesting thing: nobody, apparently, sold $105 billion worth of US Treasuries.
As a Businessinsider.com report notes , “…traders on U.S. Treasury desks were unaware of any unusual central bank flows this week- meaning ‘firesales’ of US Treasuries by EM (emerging market) central banks appears to be an insufficient explanation for the large drop in holdings.”
Most media reports suggest investors are pointing the finger of suspicion at Russia.
Given the escalating tensions between Russia and the West over the former’s actions in Ukraine, and the threat of sanctions on Russia, it is possible that Russia might have shifted its Treasury holdings outside the US to enable it to access its own money if sanctions are imposed, according to traders.
Indeed, if there was any dumping of Treasuries on the markets, bond yields would have climbed sharply. But as the Wall Street Journal notes, the benchmark 10-year note’s yield was recently at 2.63%, falling slightly for the week.
Some traders are, therefore, interpreting the drop in Treasuries to mean that some central bank (or banks) may have merely transferred their holdings to another account, instead of selling them.
We don’t know that it’s Russia for sure.
What we do know for sure is that more than $100 billion in US Treasuries has disappeared.