The world’s Central banks in anticipation of the fed meeting in September, we had the largest in 38 years, the sale of U.S. Treasury bonds. Russia has reduced investments by $11 billion in Sales in the coming year will continue, analysts say
World governments and Central banks in September have sold US treasuries to a record since 1978 the amount of $47.1 billion, according to data from the U.S. Treasury. The information was published on Thursday, November 17, the Agency traditionally reveals information about changing attachments largest creditors in its assets with a two-month lag.
After 12 months, sales exceeded $200 billion, and the total investment of the world’s governments and Central banks fell to its lowest level since July 2012 at $3.9 trillion. Thus the market reacted to the December meeting of the Federal reserve system (FRS), on which the regulator will take decision on interest rate hike, according to respondents RBC analysts. In their opinion, in the medium and long term trend will continue.
The biggest seller was China, for a month reduced their investment by $28.1 billion, to the lowest since July 2012 level of $1.16 trillion. Beijing dumps US Treasuries for the fourth month in a row. For the year he sold U.S. securities to a record $101 billion. nevertheless, China remains the largest holder of us government bonds.
The portfolio of us government bonds of Japan, the second after the PRC holder of Treasuries declined for the month at $7.6 billion, to $1,14 trillion. Japan reduces portfolio for the second month in a row.
In September the massive sale joined Russia. She dumps US Treasuries for the third month in a row, but if in July and August, the reduction amounted to a total of $3.4 billion, in September, was sold government bonds to record for almost two years $11 billion to a minimum of June 2015 at $76,5 billion If not to take into account the currency crisis by the end of 2014, when it is in urgent withdrawal of dollars of government bonds to support the ruble, the volume of investments in US Treasuties back to the levels of summer 2008. Since July, Russia has fallen from 16 th place among the major holders of us government bonds to 18th, behind Canada and South Korea.
Saudi Arabia, who sold bonds in the past eight months, in September reduced the volume of investments at $3.6 billion, to $87,4 billion compared with September last year its investments in these assets decreased by a substantial $22.6 billion
As noted by chief economist of the Eurasian development Bank Yaroslav Lissovolik, key sellers, such as China and Saudi Arabia, are pulling money out of US Treasuries to carry out “anti-recessionary actions”: China is spending foreign currency reserves to support the yuan, which yesterday renewed an eight-year low, as Saudi Arabia — to cover the budget deficit, which reached almost 17% of GDP, due to low oil prices.
Russia is in contrast to Beijing and Riyadh, not spending and accumulating reserves, says chief economist of “Renaissance Capital” Oleg Kuzmin. “We can assume that the Central Bank as Manager of international reserves now reduced the share of dollar-denominated assets and increased the proportion in other currencies, primarily in euros. Further actions will depend on how the Central Bank will continue to change the structure of investments,” he says.
The sale will continue
According to the operative data of the Ministry of Finance, foreign holders of us government bonds continued to sell them in October, whereas November 9 — after the announcement of the election of the President of the United States Republican Donald trump, whose trade and fiscal policies were perceived by the market as a threat to the stability of the global financial system — the yield on 10-year US Treasuries jumped to 16 November, almost 33% (from 1.72 to 2.28%). Investors are concerned that the implementation of trump’s promises to introduce a policy of protectionism and increasing budget spending will drive inflation and increase the country’s budget deficit. Markets are also waiting for the December fed meeting, which, as expected, the regulator will decide on the rate increase. 17 Nov fed Chairman Janet Yellen stated the intention of the regulator to raise rates “in the near future.” At the moment, the probability of a rate hike by 0.25 percentage points is estimated at more than 90%.
Interviewed by RBC analysts expect it to continue a global sell-off of government bonds, despite the fact that on November 16 yields rebounded amid positive data on industrial production and wholesale prices for October. As reported by Reuters, 16 November the dollar has declined relative to other leading world currencies in moderate 0.3% versus an eight-day continuous growth of about 4%.
“The market is waiting for fed’s decision before the winning trump, and in anticipation of this decision the sale, including the Russian Central Bank to continue, as higher rates will negatively affect the value of the US Treasuries,” says the analyst of “Finam” Bogdan Zvarich.
Selling Treasury bonds allows the US government to carry out public spending in the face of large budget deficits. US Treasuries are considered the most reliable securities in the world financial market.
The numbers observed on sales of us assets, not a temporary surge and concerns about a certain, relatively long-term trend associated primarily with the fiscal policy of the United States, which may lead to increased budget deficits and the need for its more active financing through borrowings, said the chief economist of the Eurasian development Bank Yaroslav Lissovolik. “It certainly creates certain risks, despite the unequivocal status of the dollar and U.S. assets as a “safe Harbor,” he adds.
The cost of US Treasuries, the world benchmark, which is the count value of the securities in other countries, explains Zvarych. “Accordingly, the growth yield of us government bonds leads to the increase of profitability. We see that in Russia there is a negative trend. November 16 in the first half of the day ruble did not react to a pretty strong recovery in oil prices. This may indicate the presence of increased demand for the currency, the withdrawal of Western investors invested in Russian bonds, their funds”, — said the expert.
According to Lisovolik, Russia, like other countries, will continue to sell bonds, but not as sharply as in September. “Too sharply reduce the share of investments in dollar assets are not very profitable. Given that investors continue to hold American assets significant reserves, excessive movement in the direction of an impairment of these assets is fraught with losses. The process will proceed in the medium and long term,” he explains.
Total amount of investments of foreign investors (such as world governments and Central banks and private investors) in US Treasuries in September, only slightly decreased by $41.7 billion to $6,154 billion. And for the year volume of investments increased by 48.8 billion from $6,105 trillion.