Foreign Central Banks Liquidate A Record $403 Billion In US Paper
One month ago, when we last looked at the Fed's update of Treasuries held in custody, we noted something troubling: the number had continued to drop sharply, declining by another $14 billion in one week, and pushing the total amount of custodial paper to $2.788 trillion, the lowest since 2012. One month later, we refresh this chart and find that in last week's update, there is finally some good news: foreign central banks finally bought some US paper held in the Fed's custody account, which following months of liquidation, rose over the past two weeks by $23 billion, the biggest two-week advance since November of 2016, pushing the total amount of custodial paper to $2.816 trillion, the highest since early October.
That was the good news, and we use the term loosely in as much as the custody account can be used as a proxy of foreign buying, which according to most rates watchers, it can.
Recall that in mid-November, we reported that in the latest 12 months we observed a record $375 billion in Treasury selling by foreign central banks in the period August 2015-September 2016, something unprecedented in size.
Fast forward to today when in the latest monthly update for the month of October, we find that what until a month ago was "merely" a record $375 billion in offshore central bank sales in the LTM period ending September 30 has, one month later, risen to a new all time high $403 billion in Treasuries sold in the past 12 months.