from Follow the Money

So where exactly are Russia’s reserves

May 17, 2006

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In the first quarter. Russia's reserves increased by about $20b.

Over that same time period, Russia cut back its exposure to the US -- judging from the TIC data -- by almost $5 billion.   Russia's holdings of short-term US securities and its US bank deposits fell by $10.2 billion, while its holdings of long-term debt increased by only $5.5b -- for a net fall of $4.7b.

Rising reserves. reduced claims on the US.  Evidence of reserve diversification?  Or evidence of custodial bias, and short-term debt held in the US was converted into long-term debt held by London custodians?  Who knows.

One thing is clear: the very weak official inflows in the March TIC data are hard to square with the growth in global reserves in March.    China's holdings of US debt went up by about $5 billion -- with around $6.3b in purchases of US long-term debt offset in part by reduced short-term claims.  But overall official inflows were only $1.8b in March.

Why? Russia isn't the explanation -- the run down in its short-term claims on the US doesn't show up in the data on purchases of long-term debt.  Look to Norway, which sold lots of Treasuries in March.  It did the same thing last March, only to buy them back in April.  It is not necessarily following Sweden's lead.

Still, i find it harder and harder to use the TIC data to track official inflows, particularly now that so much reserve growth is coming from the oil exporters.  Chinese purchases also tend to be small relative to Chinese reserve growth.   The result: that data on inflows just doesn't track the data on reserve growth -- and it is hard to tell if central banks are buying through other channels or looking for other places to part their funds from the US data alone.  

The global reserve growth numbers were quite strong in March -- though nothing like those in April.  Asian reserves -- setting China aside -- were up $38b.   Not all that was valuation gains either.  China's reserves are likely up $30b.   The oil exporters probable added $60b ... and so on.  Maybe $35b of that is valuation gains, but it still leaves $95 in real reserve growth.

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