Via GaveKal:
Regular readers will know that among the key influences on global markets is what I call “international liquidity,” which I have long monitored using an item on the US Federal Reserve’s balance sheet labeled “securities held in custody for foreign official and international accounts.”
This barbaric wording refers to the US dollar foreign reserves of other countries, largely invested in US treasuries, which are held in custody by the Fed on behalf of non-US central banks. With the possible exception of gold, which is relatively illiquid, holding US treasuries at the Fed is about the safest investment a central bank can make, since both the assets and the custodian are as reliable as you can get.
