Central banks still scooping up beaten-down Treasuries: McGeever
By Jamie McGeever
ORLANDO, Florida (Reuters) -If you view global central banks' and reserve managers' appetite for U.S. Treasuries through a value-adjusted lens, official sector demand for U.S. government bonds still looks solid and consistent.
This is maybe surprising, given the fragility of the U.S. bond market in the face of soaring government debt issuance and growing concern over Washington's fiscal trajectory, a recent U.S. credit rating downgrade, and fairly sticky inflation.
That's the narrative gripping markets at a time when deepening tensions between Washington and Beijing raise fears that major creditor China is keen to reduce its exposure to U.S. debt, with other central banks quietly keen to follow suit.
The latest country in the spotlight is Saudi Arabia, after a recent Bank of America note highlighted the oil exporters' nominal Treasuries holdings have plunged more than 40% from a pre-pandemic peak in February 2020.
Bank of America analysts also note that a down year for Treasuries this year will mark the first three-year downturn since the founding of the American Republic.
But while there are signs of selling around the edges from central banks and their market footprint is much smaller than it once was, the reality is rather more benign.
CENTRAL BANK PURCHASES
Valuation-adjusted data show that central banks' holdings of Treasury securities have rebounded from October's 10-year low, and buying this year is on track to top last year's chunky $183 billion.
Indeed, foreign central bank purchases in the two and a half years through June this year come to $283.5 billion, according to Reuters calculations based on adjusted figures from Fed economists Carol Bertaut and Ruth Judson.
That's well over quarter
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