Selling of U.S. Treasuries

Brazil and Canada were among big sellers of Treasurys in the latest month for which data is available and the previous year, catching analysts off guard and raising speculation that quieter nations may be concerned about investing in the U.S.

Brazil and Russia, which along with India and China are part of the so-called BRIC countries, have expressed concern with the strength of the U.S. dollar. It was therefore not so surprising that the two countries reduced their holdings of Treasurys in May, according to the latest data available from the Treasury International Capital report released last week. The two are among the largest holders of Treasurys.

But Canada, the biggest trading partner for the U.S., has publicly said nothing of the sort. Taiwan and France were also notable sellers of Treasurys in the latest month.

"It's a bit like friendly fire," said Michael Woolfolk, senior currency strategist at The Bank of New York Mellon. "We saw some record selling of long-term Treasurys and that's exactly the kind of thing Wall Street and the government have been worried about for years, and it came from some unexpected places."

Markets, especially currencies, took comfort that China - the largest holder of U.S. Treasurys - continued adding to its holdings despite repeated commentary from officials that it may do otherwise. Japan, the second largest holder, reduced its Treasury portfolio in the latest month but has increased it substantially in the previous 12 months.