Top: weekly change in the volume of US government bonds on the balance sheets of world central banks in millions of US dollars, below: the volume of dollar liquidity received through FIMA in billions of US dollars. Data: Fed, Source: Bloomberg
In the week ending March 22, foreign central banks sold US government bonds worth $76 billion, a record high since March 2014, Bloomberg writes, citing Fed data. But this happened not at all because they fear the notorious “end of the dollar”, because at the same time, the demand for the American currency through the special mechanism FIMA * (Foreign and International Monetary Authorities) soared to a record $60 billion, while, according to Bloomberg, even at the peak of the 2020 pandemic, this figure did not exceed $1.4 billion. Thus, the world central banks just urgently needed a lot of dollars.
ProFinance.ru: the mechanism is a source of short-term dollar liquidity. Its participants in the framework of REPO operations receive dollars from the Fed in exchange for US government bonds
It is worth noting that the last reporting period for which such data is available ended before the problems with Deutsche Bank, whose shares on Friday lost regarding 15% intraday. So the surge in demand for dollar liquidity in the week until March 22 can be attributed to the risks associated with the Swiss Credit Suisse, but not only.
According to Wrightson ICAP, at the moment, only a very small part of the $136 billion received from the sold Treasuries and borrowed from the Fed through FIMA ($76 billion + $60 billion) has returned to the US regulator.
“Someone, somewhere, needs dollar funding,” notes Antoine Bouvet, senior rate strategist at ING Bank.
Prepared by ProFinance.ru by materials Bloomberg
MarketSnapshot — ProFinance news. Ru and market events in Telegram
On this topic:
Fed liquidity boost bad for dollar, says Deutsche Bank’s Raskin
Swiss central bank to provide Credit Suisse with liquidity if needed
Investors still worry regarding potential victims of the banking crisis
BofA and UBS cut Fed rate forecast amid banking crisis
Goldman: Small banks will be more cautious in lending, which stimulates the slowdown in the economy
