Foreign Cenbank Agency Debt Selloff Accelerates Inexorably

"Foreign central bank holdings of agencies: For the past 7 weeks, foreign central banks have sold U.S. agency securities bringing the Fed’s holdings of these securities on behalf of foreign central banks down $93 billion to $891 billion. These sales coincided with a sharp widening in credit spreads between agency debt and Treasuries. The widening prompted the Fed to announce that it will begin purchasing $100 billion of agencies beginning next week. Yield spreads have tightened sharply since the announcement, helping to drive mortgage rates down and the stock market up."