Global sell-off of US Treasuries by central banks in 2016 has accelerated to the fastest pace since 1978, according to a recent article by CNN reaching a net $123 billion.
As illustrated in the chart below, net first quarter sales are already more than half of the net selloff for all of 2015 (Source: Treasury.gov).
Since the third quarter of 2015, global central banks have liquidated nearly $266 billion in US Treasuries.
And, it’s obvious analysts are taking notice over the past several months, as major news outlets produce alarming headlines: Treasury Sell-Off Gets Serious (Barrons), How the Treasury selloff could turn ‘chaotic’ (CNBC), and The biggest American debt selloff in 15 years (CNN).
Much of the blame has been placed on uncertainty concerning China, but that is a mere distraction.
Bundled secretly with other “oil exporting nations” for decades, the US recently released data regarding US Treasuries held by Saudi Arabia, as reported by Bloomberg last week.
Interestingly, Saudi Arabia is selling US Treasuries at the same time it is seeking to raise money with a bond issue of its own, as reported by CNBC in April.
Independently, those are simply signs that Saudi Arabia needs liquidity. Together, they signal perceived weakness (globally) in the US Treasury market.
Why else would a country seeking to raise capital sell foreign holdings that are declining in value…unless they projected even further declines?
As US Treasuries continue to flood the market, rates will continue to rise and Treasury values will continue to fall. How fast and how far is yet to be seen…
Proceed with caution!