Foreign central bank Treasury bonds held at the Fed dropped the most on record in the latest week and the WSJ suspects it could be Russia moving its holdings to offshore accounts.
“This is only speculation on our part, but it seems likely that the Russian authorities had more than $100 billion of Treasury debt in custody at the Fed, and it doesn’t seem implausible that they moved it to a jurisdiction where it would be less vulnerable to a U.S. asset freeze,” said Lou Crandall at Wrightson ICAP LLC.
At the end of the day, $100 billion isn’t that much money and real trouble in Ukraine would cause money to scramble into Treasuries anyway but it would definitely cause some volatility. The effect might come through the FX market as Russia sells Treasury holdings to prop up the RUB, in effect that would help EUR/USD.
