Let's say you irritated your banker; not a wise move, but we humans don't always think rationally.
Your banker angrily threatens to bring you to heel by locking you out of your accounts. You get a week or so to correct your behaviour, or suffer the consequences. What do you do?
Most likely, your rational side kicks in and you get your money as far away from said banker as you can, while the getting is good.
That seems to be what Russia did this week.
Bond traders Friday woke up to a record decline in the value of U.S. Treasury securities held at the Federal Reserve by international central banks. As of Wednesday, Treasuries held in custody at the Fed for "foreign official and international accounts" were worth $2.86-trillion (U.S.), a massive drop from $2.96-trillion the previous week.
The previous record, according to Bloomberg, was a $32-billion decline in June. Back then, bond prices were wobbling because the Fed's leaders were talking about winding down their asset-purchase program. Lately, bond prices have been sturdier, raising questions about why the holdings data would change so dramatically.
"The timing of the drop in custody holdings makes Russia a more likely suspect," Marc Chandler, the widely-read head of global currency strategy at Brown Brothers Harriman, told Bloomberg Businessweek.
A client note by Mr. Chandler Friday morning appears to be what got the attention of the financial press. Mr. Chandler said he doubted Russia would have sold its holdings of Treasuries. Rather, the Russian central bank – if it is indeed responsible – simply could have transferred its U.S. bills and bonds to another location.
Russia, of course, is facing international sanction over its refusal to remove its troops from the Crimean region of Ukraine. While traditional trade sanctions could be deployed, far more effective in getting Moscow's attention would be cutting off Russians from an international financial system that flows through New York and London. Freezing Russian assets in the West would be a logical place to start.
"Bank Rossii publishes data on managing foreign-currency assets not earlier than six months after the given period because of the high sensitivity of prices on global financial markets to the actions of largest market participants, including the Russian central bank," Anna Granik, a spokesperson for the Moscow-based central bank, said in an e-mailed response to questions from Bloomberg.