Russia Leaves U.S. Debt Hoard Intact After $81 Billion Retreat

(Bloomberg) -- Russia halted a shift out of Treasuries held onshore in the U.S. after a mass exodus in the wake of sanctions in April.

Figures published on Wednesday indicated Russia’s holdings of U.S. bills, notes and bonds were unchanged at $14.9 billion in June. The numbers for April and May showed a reduction of $81 billion, or about four-fifths of the total, leading to speculation that Russia is dumping American assets to protect itself from the growing risk of harsher U.S. sanctions.

Russia Leaves U.S. Debt Hoard Intact After $81 Billion Retreat

Once among the top 10 foreign owners of U.S. Treasuries, Russia has sent conflicting signals about what it’s doing with its holdings, with President Vladimir Putin in July saying his country isn’t abandoning the dollar. But Finance Minister Anton Siluanov acknowledged last week that Russia’s intent is to cut further its ownership of American securities and reduce reliance on the U.S. currency in an effort to protect its economy from new sanctions.

The Kremlin may be trying to pull off a balancing act by mostly shifting its cache offshore, rather than selling outright. Analysts at the Council of Foreign Relations this week found that holdings of American bonds in Belgium and the Cayman Islands increased by about $45 billion in the same period that Russia was reducing its U.S.-based hoard, meaning it may have been an attempt to protect against seizure.

Russia’s main export, oil, is traded primary for dollars, and the central bank reserves the right to use the greenback to stabilize the ruble through market intervention. According to the Bank of Russia’s latest data, the dollar’s share in the country’s international reserves at the start of 2018 climbed to nearly 46 percent from just over 40 percent a year earlier.

“Given that Russia needs dollars to conduct trade and provide liquidity for its banks, it would be reckless of Russia to dump 84 percent of its Treasuries,” Benn Steil, who co-authored the Council of Foreign Relations report, said by phone from New York.

Russian central bank data shows that the country’s total stock of foreign securities actually increased by about $11 billion in June. But its not clear whether any of that number includes Treasuries and how much of the increase is due to fluctuations in the exchange rate.

Russia Leaves U.S. Debt Hoard Intact After $81 Billion Retreat

For the period of March to May, the data show a drop of about $50 billion, suggesting that Russia probably did sell some Treasuries, just not as much as it seemed at first glance.

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