With crude oil prices dropping and bond yields consequently rising, members of the Organization of Petroleum Exporting Countries are unloading Treasuries at the fastest pace in more than three years.
The Treasury Department reports that exporters including Indonesia, Saudi Arabia and Venezuela sold 9.4 percent, or $10.1 billion, of their U.S. government debt securities in the three months ended in November.
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The sale marks a reversal since OPEC countries have increased their holdings of U.S. government bonds by 70 percent in the past 17 months, Treasury data show.
According to Bloomberg.com, the OPEC nations last sold Treasuries for three consecutive months in June 2003.
Research from Pacific Investment Management Co. shows oil producing countries have exceeded Asian central banks as the largest pool of global savings, accumulating an estimated $500 billion just in 2006.
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Bloomberg.com explained that OPEC members are selling Treasuries "because crude prices have declined 34 percent from a record high of $78.40 a barrel in July. They are reducing demand for U.S. government bonds at the same time as central banks from Chinas to Romania say they want to cut holdings of dollar-denominated assets."
OPEC countries increased their holdings of U.S. government bonds by 115 percent from 2002 to 2006 when the price of oil per barrel nearly tripled. Even with their sell-off of bonds, the Treasury said the OPEC countries still hold more Treasuries than they did in 2005, when oil prices increased 41 percent.
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