March custodial data shows seven of the ten largest foreign official holders of US Treasuries trimmed their positions, a broad-based reduction coinciding with geopolitical volatility linked to Iran. The scale of simultaneous selling by sovereign holders is notable and adds to existing pressure from domestic fiscal concerns and rising long-end yields.
For Armada's traditional repo desk, sustained foreign official selling reduces the natural bid for Treasuries, potentially widening bid-ask spreads and increasing intraday price volatility on collateral. Counterparties like hedge funds and asset managers using Treasuries as repo collateral may face larger mark-to-market swings, and haircut models should be recalibrated to reflect reduced foreign official demand as a structural support.