Russia divested of US Treasury securities

A US Treasury report released on July 18 shows that Russian holdings of Treasury securities declined by 84 per cent between March and May, down to just $14.9 billion from March holdings of $96.1 billion.

The report was issued quietly amid the controversy surrounding President Donald Trump's July 16 meeting with Russian President Valdimir Putin in Helsinki, dropping Russia from the list of major Treasuries holders without comment.

  Daily Mail

Hmmmmm.

But yields quickly stabilized, indicating that any Russian bond dumping had little effect on the overall market or the US government's cost of borrowing.

Still doesn't explain why they sold so much. Nor why the US Treasury waited until two days after Trump's Helsinki meeting with Putin to report the sale.

Investors are mystified by the move, which reduced Russia's Treasury holdings to levels lower than those of Kazakhstan, Peru or Colombia at the end of May, according to government data.

Some are speculating that Russia was reacting to US sanctions, in a possible preemptive move to divest assets before they could be seized.

Russia's financial sector, including some top state banks, are essentially barred from US capital markets by the sanctions.

A new round of sanctions took effect in April, targeting 24 Russian oligarchs and 12 related companies, in response to accusations of 'worldwide malign activity' by the Russian government.

That doesn't explain March. What did they know about sanctions in March and May that they didn't know earlier? And even if it is related to sanctions, it still doesn't explain the delayed report.

It's also possibly that Russia has moved its Treasury holdings offshore.

Preparing for what?

The third possibility is that Russia predicted a move in the market, and hoped to take advantage. If so, such a market move has yet to materialize.

The fourth possibility is that something was arranged with the Trump cabal.

'The market now has the answer to what would happen to Treasuries if a major holder decided to sell everything,' Ian Lyngen at BMO Capital Markets jokingly told Chappatta. The answer, in this case: essentially nothing.

China remains by far the largest holder of US Treasury securities, holding $1.18 trillion at the end of May. Japan is second, with $1.06 trillion.

Yeah, and $80 billion is a far cry from $1 trillion, so I wouldn't count on a similar percentage sale of Chinese or Japanese holdings not producing any effect.

This also points up something I heard a while back on NPR about Trump bowing to Putin and Russia as being so important: the Russian economy is very small compared to other trading partners like China and Japan. Why so determined not to rock the boat with Russia?

Yes, I think we all know the answer to that: it's personal, for Trump's benefit, not our country's.

...but hey, do what you want...you will anyway.