Monday, October 21, 2013
Foreign Treasury Holdings Down
The monthly report on foreign Treasury holdings shows that they declined again this past month. Over 4 months they are down from 5721.8 to 5590.1 for a total loss of $131.7 billion. This is an average of about $33 billion per month.
In the prior 8 months foreign holdings went from 5381.6 to 5721.8 for a total increase of $340.2 billion or $42.5 billion per month.
It is too early to say for sure, but there is a chance that foreign holdings have peaked and might keep going down from here. Going from an average increase of $42.5 billion per month to an average decrease of $33 billion per month is a $75.5 billion per month change.
This is on the order of the Fed's $85 billion per month monetization. In fact, you could imagine that most of the Fed's buying over the last 4 months is just compensating for this change. If the Fed had stopped buying, and foreigners kept buying instead of selling, the supply/demand situation would be similar to what it is now. So if this change by foreigners is ongoing, it is a big change.
There is a good article on this topic.
The Fed is now buying more bonds faster than the Treasury is making new bonds, so someone had to be getting out of bonds. It seems it is foreigners.
It could increase into a panic at some point. It is worth watching these numbers each month. It seems to indicate less foreign confidence in the dollar and less desire to use it as the global currency. The Triffin Dilema has long predicted the end to an unbacked reserve currency. We may be seeing the start of this.