Russia buys US government bonds at 7 year record rate
In 2017, Russia drastically increased its investment in US government bonds. The US Treasury Department reported that over the year the Central Bank, which oversees Russia’s gold and foreign currency reserves, bought $16.1 billion worth of US securities. At the start of January, Russia held $102.2 billion in the treasuries, equivalent to 23% of the total gold and foreign currency reserves, Finanz.ru reports.
30% of all the Russian Central Bank’s foreign currency ($345.5 billion excluding gold and SDR) and nearly 40% of all investments in foreign securities ($266 billion) went into American government debt.
At the end of the year, Russia became one of the top eight biggest purchasers of US securities, and overtook South Korea to become the 15th biggest holder.
According to the US Treasury Department’s statistics, the last time Russia’s Central Bank invested reserves so actively in the US was in 2010, when it invested $26.8 billion in the treasuries following a rise in the oil price and an influx of surplus oil and gas profits into Russia.
On the basis of the Russian Central Bank’s own data, all of the currency which the regulator withdrew from the Russian banking system went into US securities, wrapping up the dollar repo; Over the last year, Russian banks returned $11.4 billion which they had received as loans at the peak of the crisis in 2014-2015.
The reserve investment policy changed drastically when Donald Trump was elected US President, because Russia hoped that Trump’s presidency would help thaw US-Russian relations, eToro analyst Mikhail Mashchenko observed.
Before the US elections, Russia’s Central Bank was actively withdrawing funds from American debt: between January and October 2016, it sold $22.3 billion of US securities and reduced their portion in the gold and foreign currency reserves to a 5-year low of 19%. Active buying began in November, once the election results were known: in the first month after the elections, $12 billion flowed into the treasuries.
Central Bank’s next major deal took place between March and May 2017, when the three-month investments shot up to $22.4, a record since 2014.
In June 2017 when Trump and Putin met for the first time and the hopes of sanctions being lifted were shattered, Russian Central Bank halted its operations. In the remaining months of the year, it reduced its treasuries portfolio slightly – by $6.5 billion.
Six of the US’s top 10 creditors increased their investments last year: China was the biggest buyer ($126.5 billion), reclaiming first position also in its holdings. Saudi Arabia took second place, investing an all-time record of $44.6 billion.
The US’s previous biggest creditor, Japan, became the biggest seller, divesting of $29.4 billion.
Overall, world central banks added $216 billion to the treasuries, bringing the total up to $4.025 trillion.