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Foreign Central Banks Sell $109 Billion of Treasuries in March
- Custody holdings at Fed post largest monthly drop on record
- Decline comes as Fed rolls out repo facility to ease pressure
CL1WTI Crude28.34USD/bbl.+3.02+11.93%BMOBANK OF MONTREAL66.95CAD-1.01-1.49%
Foreign official holdings of Treasuries stashed at the Federal Reserve fell $109 billion in March, the largest monthly drop on record, as international governments and central banks struggled with the economic fallout from the new coronavirus.
The decline showed up in the Fed’s weekly custody data, with the latest figure released Thursday showing a $24 billion drop in the week to April 1.
The sales amid the past month’s pandemic-fueled turmoil are a further signal of the global rush to raise U.S. dollars as the Fed’s recently expanded dollar swap lines are accessible to only 14 central banks. Countries reliant on oil exports and smaller Asian economies have been selling U.S. debt, according to traders and market makers familiar with the transactions, and central banks have been primarily offloading older, less-liquid Treasuries.
Fed’s New Repo Measures Followed a $100 Billion Treasury Exodus
The Fed on Tuesday rolled out a temporary repurchase agreement facility that will allow a broader range of central banks to swap Treasuries for dollars, effective April 6.
“The fact that they can go to the Fed and repo these securities out for cash — at a slightly punitive rate, but they can still do that — should cap the potential price impact” in the U.S. government debt market, said Jon Hill, rates strategist at BMO Capital Markets……more here
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