The amount of U.S. Treasury bonds held by the New York Federal Reserve on behalf of global central banks has fallen to its lowest level in over a decade, raising renewed concerns in the market about whether foreign investors still favor U.S. Treasuries and other dollar-denominated assets.
This seems a bit surprising, as the recently released U.S. Department of the Treasury’s International Capital Flow report (TIC) and the International Monetary Fund’s (IMF) “Cofer” foreign exchange reserve report indicate that overseas demand for government bonds and U.S. dollar assets remains relatively robust. These two data sets are the gold standard for measuring U.S. capital flows and global foreign exchange reserves. However, their release times have a long lag— the latest TIC data is from July, while the latest Cofer data is from the second quarter.
In comparison, the custody holdings data from the New York Fed is not as…
