Thread by @Brad_Setser

. @Birdyword nails it in this article. Big rise in global holding of yen services is the by product of central banks who hold yen on a hedged basis. Their true fx exposure is to dollars.

wsj.com/articles/the-d…

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@Birdyword Kind of crazy how large a large of the Japanese bill market foreigners now hold.

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@Birdyword That's been an interesting thing about the BoP data too -- foreigners have been buying almost as many (safe, short-dated) JGBs as Japanese investors have been buying (riskier, often long-dated) corporate bonds ...

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cfr.org/blog/puzzle-ja…

@Birdyword Birdyworld notes that Australia actually discloses its hedged fx exposure, so we know they are going the swap to yen/ hold JGBs as a yield pick up v T-bills trade. All central banks should this too -- size of yen holdings imply this becoming a big gap in the COFER data

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@Birdyword WSJ gives Goldman credit for noting the rising yen share implies a higher dollar of global reserves, but gotta say that my friends at @ExanteData have been all over it too.

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@Birdyword @ExanteData And if you combine the hedged flow into JGBs with the official flows in the US BoP data, another interesting story emerges ... as the official flows recently have all been equities (could be from SWFs) and into banks (including the Fed repo pool)

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@Birdyword @ExanteData So the fall off in central bank purchases of Treasury notes doesn't seem to reflect a fall in dollar holdings, but rather a shift to shorter-dated instruments with a flat(ish) yield curve.

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@Birdyword d'oh -- big rise in holding of yen RESERVES ...