Thread: Foreigners Dumping US Treasurys in Record Numbers

Foreigners Dumping US Treasurys in Record Numbers

Friday, 30 Dec 2011 08:43 AM
By Forrest Jones

Foreign investors are selling Treasury positions in record numbers, even at a time when such assets are performing well.

In the week ended Dec. 28, foreign investors sold the second-highest amount of U.S. bonds in history at $23 billion, Zero Hedge reports, citing Federal Reserve data.

In the last month alone, foreigners sold a record $69 billion in U.S. paper. The numbers really defy logic.

"The euro plunges and the market refuses to follow, with risk assets rising on speculation the ECB (and/or Fed) are about to restart printing yet gold collapsing ... and finally with Treasurys soaring to near all time highs," Zero Hedge reports.

One widely watched investor suggests riskier assets likes stocks are looking better than bonds and Treasury bills.

"The best idea for 2012 is for investors to increase their equity exposure and decrease their bond exposure," Oakmark Fund portfolio manager Bill Nygren tells CNBC.

Many stocks are attractively priced, especially equities in big companies sitting on lots of cash.

"We think stocks are cheap. We thought that a year ago," Nygren adds.

"Businesses have performed well this year. They are earning more money, they have less shares outstanding, there's more cash on the balance sheets and bonds mathematically — even if rates went to zero — can't have the same kinds of returns they have enjoyed the past year or two."

"We think investors are making a mistake to chase performance and pull money out of equities today and put it into bonds."

http://www.moneynews.com/StreetTalk/...2/30/id/422563

Foreigners Dump Record Amount Of US Treasurys In Past Month

Submitted by Tyler Durden on 12/30/2011 07:32 -0500

With year end fund flows making absolutely no sense for the most part, thank you global central planning, as the euro plunges and the market refuses to follow, with risk assets rising on speculation the ECB (and/or Fed) are about to restart printing yet gold collapsing (on one or two hedge funds liquidating, yet econ PhDs already rewriting their theses on why the "gold bubble has popped"), and finally with Treasurys soaring to near all time highs (10 Year under 1.9% yesterday even as stocks surged on data from the National Advertisers of Realtors, aka NAR, of all fraudulent and corrupt entities), here is the latest observation to make the confusion complete. As the Fed's critical H.4.1 weekly update shows (which is leaps and bounds more accurate than the Treasury's TIC international fund flow data), in the week ended December 28, foreign investors sold the second highest amount of US bonds in history, or $23 billion, bringing total UST custodial holdings to $2.67 trillion, a level first crossed to the upside back in April. This number peaked at $2.75 trillion in mid-August, and as the chart below shows the foreign holdings of US paper have been virtually flat in all of 2011, something which is in stark contrast with what the price of the 10 Year would indicate vis-a-vis investor demand. And going back further, the last week is merely the latest in a series of Custodial account outflows. In fact, in the last month (trailing 4 weeks), foreigners have sold a record $69 billion in US paper, a monthly outflow that was approached only once - in the aftermath of the US downgrade (when erroneously it is said that a surge in demand for US paper pushed rates lower - obviously as the chart shows nothing could be further from the truth).

So here is the conundrum for today: did China continue to dump US paper in the year end, something we saw started with the October TIC data, or was it French banks continuing to sell off any non-EUR assets, and in the process repatriate proceeds, keeping the EUR higher. We don't know, nor frankly, in this uber-centrally p(l)anned market, do we care much any longer.

Chart 1 - total UST holdings in Fed custody:



Chart 2 - monthly (trailing 4 week) change in UST holdings:




http://www.zerohedge.com/news/foreig...rys-past-month