Thursday, October 18, 2007

And The Stormwatch Continues


In August, the central banks of Japan, China and Taiwan sold U.S. Treasuries at the fastest rate in as many as seven years. Taiwan cut nearly 9% of its Treasury holdings, its biggest sell-off since 2000. China shed more than 2%, their biggest move since 2002. And Japan dumped 4% of their U.S. Treasures… their largest reduction since 2002.
In all, Asian banks dumped about $52 billion in U.S. Treasures in the final weeks of summer. Not a gigantic sum, considering they own about $1 trillion more, but indicative of a trend.
Globally, central banks dumped about $163 billion in U.S. Treasuries. Not since Russia’s 1998 default have U.S. Treasures been sold at such a pace. And these numbers are from August -- before the Fed cut the overnight rate by 50 points. We won’t be surprised if next month’s TIC looks as frightening, or worse.

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