EC Just Who Is, And Who Is Not, Selling T-Bills

Are foreigners selling Treasury bills? If they are, this would seem to merit consideration for the reflation argument. After all, the paramount monetary deficiency exposed by March’s GFC2 (and the Fed’s blatant role in making it worse) was the dangerous degree of shortage over the best collateral. Best collateral means OTR, and for standard practice, this had always meant Treasury bills (as well as, noted yesterday, bonds and notes just auctioned off).

According to the TIC data updated through September 2020, yes, foreigners (both private and official) have been “selling” bills. During the month of September alone, the total was -$30.3 billion (net), split somewhat equally between FOI’s (foreign official institutions) and overseas private financials.

Not only that, TIC had revealed a good deal of selling (private; -$12.4 billion) in bills during the month of July, too.

It had followed the three previous months (April, May, and June) when the buying (net) of Treasury bills (+$311 billion cumulative) was just shy of the heaviest on record (October, November, and December 2008; +$321 billion). Therefore, the possibility appears for significant improvement: collateral shortage = huge buying earlier in the year; then less collateral shortage maybe even reflation = selling, with it possibly picking up in September.

What’s really going on here, however, is more basic and, unfortunately, unrelated to what foreigners may actually want. The federal government, like the Federal Reserve, cares nothing about broader money market conditions and even less when they relate to overseas participants in them (the irony being TIC, which by accident collects some of the best data on cross-border bank and money activities).

As the Fed had been stripping T-bills from the repo marketplace during late 2019/early 2020’s not-QE, the Treasury Department has been auctioning off substantially fewer bills since the end of June.

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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William K. 1 month ago Member's comment

What it all looks like is piling up debt that will need to be paid eventually. And when "eventually " arrives it will no longer be a free party. Of course it is quite likely that the ones to be saddled with this huge debt are not even born yet, and this not likely to benefit from it at all. It is even possible that they will realize this and become upset and unhappy.

So exactly WHO is getting the benefit from the debt being created?I can guess that it is not me. In fact, I am certain that it is not me.

Ayelet Wolf 1 month ago Member's comment

Well said William!

William K. 1 month ago Member's comment

Some times it does not feel at all good to be correct. On occasions like this it would be comforting to have some very informed and wise individual show that I was totally wrong. So I do wonder about why those more in a position to steer things do not steer in a different direction, and why they did not steer in a different direction previously. It can not be that everybody else is blind, can it???