We all now know that the Federal Reserve opted not to “taper” last week. In other words, it kept its monthly purchases of bonds at $85bn without reduction, in a move that was a surprise to many, even if the FT had made clear for a while that a taper was no foregone conclusion.
But have others been tapering already? The official Treasury Department data show that foreigners have this year started very gently selling down their positions of Treasuries. This is the chart:
The move is not great, but it is there. To be precise, foreign holdings of Treasuries reached $5.72tn in March, and by the end of July were at $5.59tn. This is no great change in itself, but it is changes at the margin that matter – and we already know that a “taper” or otherwise in the Fed’s bond purchases was able to generate a dramatic market reaction. So what is going on? Read more