Middle East tensions unnerve investors, boost oil prices
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Diverging Reports Breakdown
Foreign central banks are shrinking US asset exposure
The value of U.S. Treasuries held at the New York Fed on behalf of foreign central banks fell to $2.88 trillion last week. That’s the lowest since January, and the $17.1 billion decline was also the biggest fall since January. The total value of foreign. central banks’ US. custody holdings at the NY Fed last week dropped to $3.22 trillion. That figure has fallen by around $90 billion since March, just before President. Trump’s ‘Liberation Day’ tariff debacle on April 2, with more than half of the decline coming from Treas.uries. The fall in custody holdings is a warning sign, especially as it has been accompanied by a modest decline in foreigners’ usage of the Fed’s overnight reverse repo (RRP) facility. The $28.5 trillion Treasury market is deep and liquid, meaning any changes to foreign. holdings will be gradual and cautious and will be hard to predict. The latest data suggest some central banks may already be getting that ball rolling.
ORLANDO, Florida, June 17 (Reuters) – As debate rages around ‘de-dollarization’ and the world’s appetite for dollar-denominated assets, one major cohort of overseas investors appears to be quietly backing away from U.S. securities: central banks.
That’s the conclusion to be drawn from the New York Fed’s latest ‘custody’ data, which shows a steady decline in the value of Treasuries and other U.S. securities held on behalf of foreign central banks.
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There are many ways to gauge foreign demand for U.S. assets, and they often send conflicting signals. Moreover, the broadest and most accurate measures, like U.S. Treasury International Capital (TIC) or the International Monetary Fund’s ‘Cofer’ FX reserves data, come with a long lag of two months or more.
The New York Fed custody holdings figures are weekly, which is as ‘real time’ as it gets in the world of central bank flows.
These figures last week showed that the value of U.S. Treasuries held at the New York Fed on behalf of foreign central banks fell to $2.88 trillion. That’s the lowest since January, and the $17.1 billion decline was also the biggest fall since January.
Including mortgage-backed bonds, agency debt and other securities, the total value of foreign central banks’ U.S. custody holdings at the New York Fed last week dropped to $3.22 trillion, the lowest since 2017.
That figure has fallen by around $90 billion since March, just before President Trump’s ‘Liberation Day’ tariff debacle on April 2, with more than half of the decline coming from Treasuries.
If these moves are representative of broader trends, then FX reserve managers are reducing their exposure to U.S. bonds, as a share of their overall holdings and in nominal terms too.
Custody holdings at NY Fed – Treasuries and total securities Purchase Licensing Rights , opens new tab
MURKY PICTURE
It’s not easy to get a firm handle on the exact composition of central banks’ dollar-denominated assets, which are worth trillions and are spread across multiple sectors, jurisdictions and continents. This is why different cuts of central bank data can tell different stories.
For example, the latest TIC data show that foreign holdings of U.S. Treasuries rose to a record $9.05 trillion in March, with official sector holdings increasing as well. The official sector held nearly $4 trillion of bills and bonds, around 45% of all foreign exposure.
But these figures are nearly three months out of date, and foreign demand for Treasuries in recent months – in the secondary market and, more recently, at auction – has been driven by private sector institutions, not the official sector.
There are large pools of ‘hidden’ FX reserves too potentially worth trillions of dollars, held in offshore accounts, overseen by quasi-official entities like sovereign wealth funds or, in the case of China, state banks.
Meghan Swiber, director of U.S. rates strategy at Bank of America, says the fall in custody holdings is a warning sign, especially as it has been accompanied by a modest decline in foreigners’ usage of the Fed’s overnight reverse repo (RRP) facility.
When Treasuries mature, foreign central banks will often park the cash at the RRP. But they haven’t been doing that lately, Swiber says, meaning both their Treasury holdings and overnight cash balances at the Fed are falling.
“We worry about foreign demand going forward,” Swiber wrote on Monday, also pointing out that it’s “unusual” for reserve managers to reduce their U.S. Treasury holdings when the dollar is weakening. “This flow likely reflects official sector diversification away from dollar holdings.”
The $28.5 trillion Treasury market is deep and liquid, and central banks remain significant participants in it. They are cautious and careful by nature, meaning any changes to their holdings will be gradual.
But the weekly custody data suggest some central banks may already be getting that ball rolling.
(The opinions expressed here are those of the author, a columnist for Reuters)
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By Jamie McGeever; Editing by Jan Harvey
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Wall Street edges lower, oil climbs as Middle East conflict grinds on
U.S. crude settled 4.46% higher at $74.97 a barrel. Brent rose to $76.54 per barrel, up 4.52% on the day. The Bank of Japan left short-term interest rates unchanged on Tuesday. The VIX volatility index (.VIX) has risen in the last week, but at around 21 it is well below April’s highs above 60 and nowhere near the records, above 80, hit during the 2008 financial crisis.”The market was anxious to hopefully hear updates on trade agreements out of the G7 and the news of Trump leaving early was disappointing,” said Eric Sterner, chief investment officer at Apollon Wealth Management. “It does cause concern, especially if Iran does anything with the Strait of Hormuz,” he added, noting around 20% of the world’s oil supply passes through that waterway.
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NEW YORK, June 17 (Reuters) – Wall Street indexes edged lower and oil kept climbing on Tuesday as U.S. President Donald Trump left the Group of Seven summit early and investors awaited a series of interest rate decisions by major central banks this week.
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The news nixed market hopes for more progress at the summit on issues like the sweeping tariffs Trump has promised to impose on many allies.
“The market was anxious to hopefully hear updates on trade agreements out of the G7 and the news of Trump leaving early was disappointing, although we all know why,” said Eric Sterner, chief investment officer at Apollon Wealth Management.
“The market is paying attention to the (Middle East) conflict but it feels that’s contained to those two countries,” Sterner said. “It does cause concern, especially if Iran does anything with the Strait of Hormuz,” he added, noting around 20% of the world’s oil supply passes through that waterway.
U.S. crude continued to surge and settled 4.46% higher at $74.97 a barrel, while Brent rose to $76.54 per barrel, up 4.52% on the day.
No disruptions to crude supply have been reported, although news of a collision between two ships in the Gulf of Oman sent another brief jolt through the oil market overnight.
Analysts noted that the VIX volatility index (.VIX) , opens new tab has risen in the last week, but at around 21 it is well below April’s highs above 60 and nowhere near the records, above 80, hit during the 2008 financial crisis.
“This is happening at a point in time where we are less sensitive, first of all the fact being that oil prices are still down year to date, and secondly the macro economy is … showing that financial markets are relatively resilient at the moment,” Bjarne Breinholt Thomsen, head of cross asset strategy at Danske Bank, said in a webinar on Tuesday.
Stocks in Europe also sagged. The STOXX 600 (.STOXX) , opens new tab closed around its lowest in three weeks.
CENTRAL BANKS LOOM
Investors awaited meetings this week by the Federal Reserve, Bank of England and Swiss National Bank. The Bank of Japan left short-term interest rates unchanged on Tuesday, at 0.5% as expected.
U.S. Treasury yields fell ahead of the Fed’s scheduled update, which is widely expected to produce no immediate change in interest rates.
But market participants will be monitoring new projections on how Trump’s tariffs could affect growth and inflation. Traders are pricing in two cuts by the end of the year.
They are also tuning in to comments from Chair Jerome Powell, who Trump has repeatedly criticized for not lowering interest rates.
“One thing that settled the markets earlier this year was the independence of the Fed and the fact they would not be influenced, but data-driven,” said Matt Rubin, chief investment officer at Richmond, Virginia-based Cary Street Partners.
“Jerome Powell is going to continue to express that they are focused on data at this point, and that data does not warrant a cut.”
The U.S. 10-year note last yielded 4.385%, 6.9 basis points down from 4.454% late on Monday.
Additional reporting by Lucy Raitano in London and Johann M Cherian and Ankur Banerjee in Singapore; Editing by Kim Coghill, Bernadette Baum, David Evans, Deepa Babington and Richard Chang
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China’s civil servants banned from dining out in Xi’s austerity drive
Some Chinese civil servants have been ordered not to dine out in groups of more than three after deaths linked to excessive alcohol consumption at banquets. Austerity regulations released in May targeting Communist Party members and public sector workers. New dining guidelines promoted by some localities this week go even further, asking cadres to be wary of social gatherings, not treat bosses or underlings to meals, and avoid “forming small cliques” The guidance triggered a rare outpouring of complaints on social media from one of the most tightly-controlled groups in China. Three civil servants in Beijing, rural Guangdong province and Chongqing told Reuters their workplaces did not have excessive implementation of the rules. Others told Reuters they welcomed the regulations, as they hated being peer-pressured with their bosses. The number of cadres punished for violating the regulations ballooned from 9,292 in February to over 16,500 in April, the latest month for which figures are available, according to the latest data from 2012.
Deaths linked to excessive alcohol at banquets
Civil servants frustrated over strict dining guidelines
Some welcome regulations to avoid drinking culture
BEIJING, June 17 (Reuters) – Some Chinese civil servants have been ordered not to dine out in groups of more than three after deaths linked to excessive alcohol consumption at banquets, according to interviews and social media posts, as Beijing’s austerity push ramps up.
Revised austerity regulations released in May targeting Communist Party members and public sector workers now bans lavish banquets, “white elephant” infrastructure projects, luxurious car fittings and ornamental plants in work meetings.
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Analysts say the renewed push is a sign of President Xi Jinping’s longstanding preoccupation with anti-corruption and Party discipline, suggesting previous controls were not effective.
“The drinking culture among civil servants is indeed quite serious but they haven’t found a good solution yet so can only implement a ‘one size fits all’ policy,” said Alfred Wu, associate professor at the National University of Singapore.
“While Beijing wants to boost consumption, clean government – which is Xi’s fundamental priority – has a price.”
The measures come after three widely publicised cases of cadre deaths since April linked to excessive drinking at banquets. Dozens of officials have been punished in connection to the deaths in Hunan, Anhui and Henan provinces, where they attempted to conceal details of the banquets and privately compensate the families of the deceased.
GOVERNMENT OVERREACH
But new dining guidelines promoted by some localities this week go even further, asking cadres to be wary of social gatherings, not treat bosses or underlings to meals, and avoid “forming small cliques”, according to a social media post by a Communist Party body in Anhui province.
“When dining with ordinary colleagues, groups of under three are usually fine,” read the post, titled ‘does it violate regulations to dine with colleagues after work’.
“Avoid dining in high-end places, do not constantly meet the same people, do not take the opportunity to form ‘small cliques’.”
The guidance triggered a rare outpouring of complaints on social media from one of the most tightly-controlled groups in China, who increasingly feel that their personal lives are subject to excessive and arbitrary restrictions.
“Eating alone is hedonism, eating in a pair is engaging in improper male-female relations, eating in a trio is forming small cliques,” read a comment from a user in Hunan province with over 3,500 likes.
“Three of us colleagues went out for hotpot at lunch and each of us were punished with a warning,” wrote a civil servant in Shandong province.
“This is overcorrection, the essence of the guidelines is not wasting public money on lavish banquets but at each level of bureaucracy it gets enforced more harshly,” wrote a user in Guangxi region.
A civil servant in Sichuan province said her colleagues were ordered to always go straight home after work. Another cadre in Anhui province said her office recently started implementing daily breathalyser tests, while one in Shaanxi province said she was told to get rid of her office plants.
Another civil servant in Gansu province was asked to study a list of 20 types of dinner gatherings to avoid, while a state-owned enterprise worker in Wuhan was ordered not to eat lunch with colleagues from other departments or bosses.
“Our leader stressed that even if I invite someone in our canteen, spend little and pay the bill, that’s not allowed”, citing Party discipline, she said.
Some cadres in Anhui even reported cold calls from local discipline inspectors asking them to recall the rules from memory or be reported to their supervisors.
However, three civil servants in Beijing, rural Guangdong province and Chongqing told Reuters their workplaces did not have excessive implementation.
Others told Reuters they welcomed the regulations, as they hated being peer-pressured into drinking with their bosses.
The rules supplement the “eight-point regulations”, a code of conduct intended to curb rampant corruption in China’s vast bureaucracy, which Xi launched soon after taking power in 2012.
The number of cadres nationwide punished for violating the 2012 thrift regulations ballooned from 9,292 in February to over 16,500 in April, the latest month for which figures are available.
(This story has been refiled with changes to the byline and the dateline)
Additional reporting by Beijing bureau; Editing by Michael Perry
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Trump leaves G7 summit early due to Middle East situation
U.S. President Donald Trump left the Group of Seven summit in Canada a day early due to the situation in the Middle East. French President Emmanuel Macron said Trump had made an offer for a ceasefire between Israel and Iran. Trump said the former Group of Eight had been wrong to kick out Russia in 2014 after it annexed Crimea. G7 leaders from Britain, Canada, France, Germany, Italy, Japan, and the U.S., along with the European Union, had convened in the resort area of Kananaskis in the Canadian Rockies until Tuesday.. Canada has abandoned any effort to adopt a comprehensive communique to avert a repeat of the 2018 summit in Trump’s America. US and UK finalize trade deal; Canada says expects deal in 30 days.. The G7 has struggled to find unity over conflicts in Ukraine and between Israel. and Iran as Trump overtly expressed support for Russian President Vladimir Putin and has imposed tariffs on many of the allies present. The United States and Britain have finalized a trade deal, making the first country to agree to lower tariffs for the two allies.
Macron says Trump leaving is positive given potential Middle East ceasefire
Trump says removing Russia from G8 in 2014 was a mistake
US and UK finalize trade deal; Canada says expects deal in 30 days
KANANASKIS, Alberta, June 16 (Reuters) – U.S. President Donald Trump left the Group of Seven summit in Canada a day early due to the situation in the Middle East, the White House said on Monday.
French President Emmanuel Macron said Trump had made an offer for a ceasefire between Israel and Iran.
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Trump had earlier urged everyone to immediately evacuate Tehran, and reiterated that Iran should have signed a nuclear deal with the United States.
“Much was accomplished, but because of what’s going on in the Middle East, President Trump will be leaving tonight after dinner with Heads of State,” Press Secretary Karoline Leavitt said on X.
The G7 has struggled to find unity over conflicts in Ukraine and between Israel and Iran as Trump overtly expressed support for Russian President Vladimir Putin and has imposed tariffs on many of the allies present.
Trump did agree to a group statement calling for de-escalation of the Israel-Iran conflict.
“We urge that the resolution of the Iranian crisis leads to a broader de-escalation of hostilities in the Middle East, including a ceasefire in Gaza,” the statement said.
The G7 expressed support for Israel , saying it has the right to defend itself and labeled its rival Iran as a source of instability in the Middle East.
Macron said Trump’s departure was positive, given the objective to get a ceasefire.
“There is indeed an offer to meet and exchange. An offer was made especially to get a ceasefire and to then kick-start broader discussions,” Macron told reporters.
“We have to see now whether the sides will follow.”
G7 leaders from Britain, Canada, France, Germany, Italy, Japan, and the U.S., along with the European Union, had convened in the resort area of Kananaskis in the Canadian Rockies until Tuesday.
Speaking alongside Canadian Prime Minister Mark Carney earlier, Trump said the former Group of Eight had been wrong to kick out Russia in 2014 after it annexed Crimea.
“This was a big mistake,” Trump said, adding he believed Russia would not have invaded Ukraine in 2022 had Putin not been ejected.
Item 1 of 17 U.S. President Donald Trump boards Air Force One as he departs early from the G7 Leaders’ Summit in the Rocky Mountain resort town of Kananaskis to return to Washington, at Calgary International Airport in Calgary, Alberta, Canada, June 16, 2025. REUTERS/Kevin Lamarque [1/17] U.S. President Donald Trump boards Air Force One as he departs early from the G7 Leaders’ Summit in the Rocky Mountain resort town of Kananaskis to return to Washington, at Calgary International Airport in Calgary, Alberta, Canada, June 16, 2025. REUTERS/Kevin Lamarque Purchase Licensing Rights , opens new tab
“Putin speaks to me. He doesn’t speak to anybody else … he’s not a happy person about it. I can tell you that he basically doesn’t even speak to the people that threw him out, and I agree with him,” Trump said.
Though Trump stopped short of saying Russia should be reinstated in the group, his comments had raised doubts about how much Ukrainian President Volodymyr Zelenskiy can achieve when he is scheduled to meet the leaders on Tuesday.
“It was a rough start,” said Josh Lipsky, a former senior IMF official who now chairs the international economics department at the Atlantic Council.
European nations had wanted to persuade Trump to back tougher sanctions on Moscow.
A spokesperson for the Ukraine embassy in Canada said Zelenskiy was still planning to come to Canada.
Canada has abandoned any effort to adopt a comprehensive communique to avert a repeat of the 2018 summit in Quebec, when Trump instructed the U.S. delegation to withdraw its approval of the final communique after leaving.
Leaders have prepared several draft documents seen by Reuters, including on migration , artificial intelligence, and critical minerals . None of them have been approved by the United States, however, according to sources briefed on the documents.
Without Trump, it is unclear if there will be any declarations, a European diplomat said.
Carney invited non-G7 members Mexico, India, Australia, South Africa, South Korea and Brazil, as well as Ukraine.
TARIFFS
Trump and British Prime Minister Keir Starmer said on Monday they had finalized a trade deal reached between the two allies last month, making Britain the first country to agree to a deal for lower U.S. tariffs.
Carney said in a statement he had agreed with Trump that their two nations should try to wrap up a new economic and security deal within 30 days.
Trump said a new economic deal with host Canada was possible but stressed tariffs had to play a role, a position the Canadian government strongly opposes.
“Our position is that we should have no tariffs on Canadian exports to the United States,” said Kirsten Hillman, Canada’s ambassador to Washington.
Additional reporting by David Ljunggren and Suzanne Plunket and Andrea Shalal in Washington; Editing by Caroline Stauffer, Paul Simao, Rod Nickel, Nick Zieminski, Stephen Coates and Shri Navaratnam
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US Transportation chief wants civil aviation to return to zero tariffs
U.S. Transportation Secretary Sean Duffy said he wanted civil aviation to return to a 1979 zero-tariff trade agreement. Duffy said the White House was aware that the U.S., a net exporter in aerospace, was dealing with a complicated tariff situation. Airlines and planemakers have been lobbying Trump to restore the tariff-free regime under the 1979 Civil Aircraft Agreement that has yielded an annual trade surplus of $75 billion. GE Aerospace CEO Larry Culp praised “the Trump Administration for recognizing the critical role aerospace plays in driving the US. economy”
PARIS/WASHINGTON, June 17 (Reuters) – U.S. Transportation Secretary Sean Duffy said on Tuesday that he wanted civil aviation to return to a 1979 zero-tariff trade agreement but noted it is part of broader trade talks.
Speaking at the Paris Airshow, Duffy said the White House was aware that the U.S. is a net exporter in aerospace, but added that it was dealing with a complicated tariff situation.
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Airlines, planemakers and several U.S. trading partners have been lobbying Trump to restore the tariff-free regime under the 1979 Civil Aircraft Agreement that has yielded an annual trade surplus of $75 billion for the U.S. industry.
“You look at what free trade has done for aviation. It’s been remarkable for them. It’s a great space of net exporters. And so the White House understands that but if you go over there and you see the moving parts of what they’re dealing with, it is pretty intense and it’s a lot,” Duffy said. “I think we should take aviation off the negotiating table by going back to ’79 and that only helps us. And to take some tools away from our trading partners would be beneficial to us.”
U.S. President Donald Trump has imposed tariffs of 10% on nearly all airplane and parts imports, and in early May the Commerce Department launched a “Section 232” national security investigation into imports of commercial aircraft, jet engines and parts that could form the basis for even higher tariffs on such imports.
Aerospace companies and many countries have urged Trump not to impose new tariffs.
Trump’s executive order on a trade deal with the United Kingdom signed Monday includes tariff free treatment of airplanes and parts.
GE Aerospace (GE.N) , opens new tab CEO Larry Culp said the “U.S.-U.K. trade deal eliminating tariffs on the aerospace sector is a significant step forward in preserving the duty-free environment.”
He praised “the Trump Administration for recognizing the critical role aerospace plays in driving the U.S. economy and support this deal as a model for future trade agreements.”
Reporting by Joe Brock in Paris and David Shepardson in Washington Editing by Mark Potter and Franklin Paul
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