There's been a lot of sabre-rattling from some European countries, Russia, Japan and China recently, but now we have the intention to sell US treasuries and move into other vehicles expressed clearly.
Across the Curve Blog Archive Dow Jones Story on Russia and the $
Quote:
Dow Jones Story on Russia and the $
June 10th, 2009 9:21 am | by John Jansen |
Submitted on 2009/06/10 at 8:59am
MOSCOW (Dow Jones)–Russia’s central bank said Wednesday it plans to reduce the proportion of foreign exchange reserves it invests in U.S. Treasury bonds as Moscow continues to bemoan the dollar’s status as a global reserve currency.
“We plan to cut the share of U.S. Treasuries since the window of opportunity to work with other instruments is opening,” Deputy central bank Chairman Alexei Ulyukayev told Russia’s State Duma, or lower house of parliament, according to a report by the Interfax news agency.
Russia holds around $400 billion in gold and forex reserves, the world’s third-biggest stash behind China and Japan.
Ulyukayev said reserves are just over 30%-invested in U.S. Treasuries at present. He didn’t specify by how much that figure would fall.
Ulyukayev said Russia would shift some into bonds issued by the International Monetary Fund and deposits at commercial banks.
Russian Finance Minister Alexei Kudrin said in late May that Moscow is ready to invest $10 billion in a potential bond issue by the IMF, which may raise debt to help support struggling nations during the global economic crisis.
The bond offering, which would be the IMF’s first, would be tailored to the so-called BRIC countries of Brazil, Russia, China and India.
“From an economic standpoint it makes sense,” said Roland Nash, chief strategist at investment bank Renaissance Capital in Moscow.
He said Ulyukayev’s comments should be seen against the background of a depreciating dollar and rising U.S. government debt burden.
“It shouldn’t come as a shock to anyone they’d already said they wanted to (reduce their dollar holdings),” Nash said. “It’s something (the central bank) will do gradually.”
China, which is the largest foreign holder of U.S. Treasuries, has shaken the dollar in recent weeks by suggesting that a greater share of global reserves should be denominated in Special Drawing Rights - a quasi currency issued by the IMF.
But since U.S. Treasury Secretary Timothy Geithner travelled to Beijing for meetings at the start of this month, the suggestions from Beijing have become less strident.
Moscow - as well as Beijing - has repeatedly criticized the dominance of the U.S. dollar in the global economy, saying a new supranational currency is needed to promote stability.
Russian President Dmitry Medvedev said recently that Moscow could mimic moves by China and Brazil, which have sought to raise the status of their currencies through swaps arrangements with one another.
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In the face of massive, long-term inflation/depreciating value of the USD (relative to other currencies and commodities) that last autumn's panic hasn't managed to mask... The beginnings of a death spiral are here.
Central bank monetising debt on a massive scale (due to lack of demand for the enormous sums of debt issued, the sums purchased by the fed aren't accidental or engineered for QE - and yes it is monetised. There's no way the fed will ever liquidise those assets. Hello massive inflation of sorts.), huge foreign debts, depreciating currency and precisely zero possibility of economic 'growth' coming to the rescue... Not a pretty picture.
Some of the major foreign holders of bonds are starting to blink and sell their positions. China has been talking this game the loudest and the longest, but here's Russia with a clear policy statement.
Is this the end of the last, great bubble? The US treasury market?