UPDATE 1-Foreign central banks' U.S. debt holdings sink

Thu Mar 13, 2014 5:23pm EDT

NEW YORK, March 13 (Reuters) - Foreign central banks' overall holdings of U.S. marketable securities at the Federal Reserve plunged in the latest week, with a particularly sharp drop in Treasuries, data from the U.S. central bank showed on Thursday.

The Fed said its holdings of U.S. securities kept for overseas central banks sank by $106.142 billion in the week ended March 12, to stand at $3.206 trillion.

The tumble brings the total on deposit with the Fed to the lowest level since December 2012.

The breakdown of custody holdings showed overseas central banks' holdings of Treasury debt fell by $104.535 billion to stand at $2.855 trillion in the week.

Foreign institutions' holdings of securities issued or guaranteed by the biggest U.S. mortgage financing agencies, including Fannie Mae and Freddie Mac, slipped by $797 million to stand at $306.301 billion.

The Fed said its holdings of "other" securities held in custody fell by $809 million to stand at $44.609 billion. These securities include non-marketable U.S. Treasury securities, supranationals, corporate bonds, asset-backed securities and commercial paper.

The U.S. central bank has been slowing its purchases of Treasuries and mortgage-backed securities recently as the world's largest economy gains momentum.

From $85 billion per month in purchases last year, the Fed is now buying $65 billion per month and is expected to keep reducing those purchases throughout the year.

The Pimco Total Return Fund, the world's largest bond fund, slashed its holdings of mortgages in February to the lowest level since at least late 2011 on bets that the Federal Reserve will conclude those bond purchases this year.

That comes even as jitters over a standoff in Ukraine have helped take yields on 10-year Treasuries back below 2.7 percent.

The full Fed report can be found on:

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