According to the US Treasury Department’s Treasury International Capital (TIC) report, foreign private holders of UST’s had been selling them steadily in the last quarter of last year. Estimates including those just released for December 2017 show a total net reduction of $24 billion. While that’s not a huge number, private overseas interests typically buy more than they sell in any given period.

There are, and were, other factors to consider. To start with, it may have been related to the tax reform that President Trump signed finally in December. The likelihood of passage increased in the months before the final legal acts, meaning that by Q4 it was widely anticipated.

Part of the tax reform bill, now law, was changed to corporate taxation. As the President said at the Oval Office ceremony, “Corporations are literally going wild over this.” There is reason to suspect they may have been.

Foreign cash holdings of especially the largest US multinationals are stored largely in UST’s along with other assets already denominated in dollars, keeping some level of foreign reserves appropriate on a case by case basis. To begin using those assets in whatever fashion, including for many companies writing a large check to the US Treasury for taxes, it would necessarily require liquidating some reserve stock.

Just how much is unclear, as is the degree to which the process may have contributed to the bond selloff that gathered pace in the wake of passage. As a temporary issue, at some point this will pass, but since TIC is two months in arrears it might now show up for several months further into the future.

In the meantime, the rest of the data for December fills out the negative liquidity picture we chronicled given all the other events of that month. Specifically, for the second year in a row repo fails jumped to more than $800 billion (and were almost perfectly identical to level recorded in the same week in December 2016), alongside gold liquidation and a severe drop in the global FX basis (negative premiums for currency swaps that indicate “dollar” shortage) especially against euros.