Foreign Central Banks Dumping U.S. Treasury Bonds, Treasure From Treasuries

Sunday, January 8, 2012
By Paul Martin

By: DeepCaster LLC
Market Oracle
Jan 07, 2012

“Holdings of U.S. Treasurys (sic) by foreign central banks has fallen by a record amount over the past four weeks according to the latest Federal Reserve data.
“The net $69 billion drop in Treasury holdings registered at the Fed by foreign official institutions comes as benchmark yields ended 2011 near record low levels…
“The decline in foreign holdings of Treasurys (sic) in recent weeks has not resulted in higher yields and lower prices because other investors have sought the safety of US debt.”
“Foreign Central Banks Cut Treasury Holdings by Record”
The Financial Times, www.cnbc.com, 12/30/11

Foreign Central Bank holdings of U.S. Treasuries have fallen to Record lows, but, notwithstanding this Massive Central Bank selling, the (ostensible) demand for these U.S. Treasuries is so great that their Prices are near record Highs.

A Conundrum!! The Solution to which reveals considerable Profit Opportunities and Wealth Protection Essentials described here, as well as the continuing disinformation published by Official Sources.

Consider Jeff Nielson’s Take on U.S. Treasuries:

“One should never underestimate Federal Reserve Chairman B.S. Bernanke… This is the same man who told the world (day after day) that the U.S. had a ‘Goldilocks economy’, where U.S. markets and house prices would keep going up forever – at the very peak of the made-in-Wall-Street U.S. housing bubble. This is the same man who then promised the world (again and again) that the U.S. economy would experience a ‘soft landing’ after that gigantic bubble had already burst. This is the same man who has announced more ‘exit strategies’ than Harry Houdini – with not one of them ever materializing.

“Yet even the infamous ‘Helicopter Ben’ Bernanke has outdone himself with his latest operations in the U.S. Treasuries market. For those who missed the news, foreign central banks (the largest holders of U.S. Treasuries) have been frantically dumping more Treasuries onto the market over the past four weeks than at any other time in U.S. history.

“Those with even the tiniest understanding of supply/demand fundamentals understand how markets operate in such situations. When there is a sudden explosion of supply, the price buyers are willing to pay for that good plummets until enough new buyers enter the market to soak-up all of that excess supply.

“So how far have U.S. Treasuries prices fallen during this ‘panic’ in the U.S. Treasuries market? Zero. To comprehend the absolute absurdity of this situation requires adding one more piece of data to our scenario: U.S. Treasuries prices are currently at their highest level in history – despite the fact that the United States has never been less solvent.

“Readers need to realize how a bond market works. Prices and yields (i.e. interest rates) move in a precisely opposite/inverse manner to each other. As yield goes up, bond prices decline in a precisely proportional manner (and vice versa). Given that yield is (supposedly) a function of risk, with the U.S. economy being less solvent than at any other time in history, this implies record-low prices for U.S. Treasuries – not all-time highs…

“Understand what is directly implied here. For maximum supply to be dumped onto this market, while prices didn’t even budge slightly from all-time highs does not merely imply ‘high demand’. It necessarily implies infinite demand. Only where demand was literally ‘infinite’ would we see sufficient buyers instantly materialize (at the highest prices in history)…
“…‘Infinite demand’ is not a plausible explanation for what has transpired in the U.S. Treasuries market…
“As a matter of unequivocal arithmetic, if there was infinite demand for U.S. Treasuries, yields for all maturities of U.S. Treasuries would be compressed to 0%. The fact that (even at the highest prices in history) these yields are not at 0% is absolute proof that there has never been anything close to infinite demand for U.S. Treasuries.
“To make these impossible parameters even more ludicrous, in the real world there are effectively zero buyers for U.S. dollar instruments – and infinite sellers…
“China and Japan (two of the world’s top-5 economies) just announced they are phasing-out U.S. dollars from their bilateral trade. This is merely the latest in an endless series of bilateral and multilateral deals which are incrementally (but relentlessly) removing the U.S. dollar as the world’s ‘reserve currency’.
“To date, these deals have already reduced the demand for U.S. dollars by $trillions per year…
“Even beyond the fact that no other nations want any U.S. dollar instruments, we are confronted with the fact that there are no other (visible) buyers able to soak-up all these unwanted U.S. dollar instruments (including Treasuries)…
“We have a seemingly intractable paradox here. In the real world there is essentially zero demand for U.S. Treasuries, while we have the recent transactions in the Treasuries market directly implying infinite demand.
“More specifically, we have no visible sources of capital to even finance the purchase of all of those Treasuries. Thus the phantom-buyer of all of these Treasuries must be an entity capable of ‘manufacturing capital’ – directly implying that this phantom-buyer has a printing-press at his/her disposal.

“At the same time, we have B.S. Bernanke getting in front of microphones day-after-day insisting that he has ended all of his bond-buying…
“…We have a farce so utterly absurd that it should not fool anyone with the brain-power to be able to count their fingers and toes.” (emphasis added)

“Maximum Fraud in U.S. Treasuries Market”
www.lemetropolecafe.com, Jeff Nielson, 12/29/11

Clearly, the most plausible inference is that The Fed and Certain of its closely Allied Central and Key Mega-Banks (in the U.S., certain Primary Dealers) are (primarily) Covertly buying up these U.S. Treasury (and Other Sovereign) Bonds in Massive Amounts.

This is Massive Debt Monetization is accomplished via largely Covert QE, a.k.a. Money Printing.

The Rest…HERE

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