parapolitical

Is Switzerland Secretly Buying U.S. Treasury Bonds?

Seeking Alpha reports:

The Swiss National Bank has signaled a willingness to keep the euro above CHF1.20. It is willing to sell unlimited amounts of Swiss francs to ensure this. Consider that it sells Swiss francs, which is fine as it has the power of the printing press, but what does it buy?

The simple answer is that it buys euros and invests those euros in core euro zone bonds, like German Bunds and French Oats. Yet this will risk exacerbating a key force that has been underpinning the Swiss franc in the first place—the widening spread between core and periphery yields within the euro zone.

Some observers have suggested that the SNB ought to buy Italian and Spanish bonds. There is a certain logic to it, but does not seem very likely. Buying triple-A bonds is one thing; buying lower rated peripheral bonds is a horse of a different color.

Meanwhile, the Financial Times reports:

… it looks like a new foreign institution has decided to bid directly at US Treasury auctions — possibly to keep its anonymity well protected. Why is the entity that bought up the issue not tempted to use the securities to borrow at such attractive levels?

Rajan says possibly because a) it fears counterparty risk and bank funding concerns or b) it is indeed a completely new participant in the Treasury market altogether, one that never intended to participate in repo lending. That makes a new foreign central bank — one whose Treasury buying patterns are still unfamiliar to us — an obvious candidate.

The question is, if it is a new foreign central bank, which one is it?