The Fed added $82 billion in Mortgage-Backed Securities (MBS) and $65 billion in Treasuries to its balance sheet while allowing $22 billion in repo agreements to roll off the balance sheet. The net gain was $126 billion in the month that the “taper” was set to begin.
In yet another unprecedented attempt to keep the air in the financial bubbles, the Federal Reserve announced the establishment of an international repo facility.
The repo facility will allow foreign central banks and other international monetary authorities to enter into repurchase agreements with the Federal Reserve. According to the Fed announcement, FIMA account holders can temporarily exchange their US Treasury securities held with the Federal Reserve for dollars that can then be made available to institutions in their jurisdictions.
China officially added gold to its reserves last month for the first time in two years. Meanwhile, the Chinese have been shrinking their holdings of US Treasuries. According to the Nikkei Asian Review, the moves are intended to reduce dependence on the US dollar.
According to data released by the People’s Bank of China, the country’s gold reserves totaled 1,862 tons at the end of 2018. That represents a 10-ton increase from the previous month and the first rise in the country’s hoard since June 2016.
The Reserve Bank of India (RBI) bought gold for the first time in nearly a decade during its last fiscal year.
The Indian central bank added 8.46 tons of gold during the fiscal year ending June 30, according to its latest annual report. The additional yellow metal brings India’s total gold reserves to 566.23 tons.
The last time the RBI bought gold was in November 2009. The Economic Times of India called the central bank’s decision to add to its gold reserves “significant.”
They say bells never ring when markets hit the top. But maybe they do and people just don’t listen.
Yesterday, Bloomberg reported China may slow or even stop its purchase of US Treasuries. In other words, a major source of US government debt financing may be pulling out. This comes at the same time the Federal Reserve has committed to shrinking its balance sheet.