News that Moves: Single Biggest Development - BRIC Countries Dumping Treasuries

RCM Comment: The following stories represent the single biggest development effecting the markets today. I'm dedicating the blog to this development in the hopes that you, the reader, give this story the respect it deserves. There will be those among you who try to minimize the story or wish to overlook it in the vain hope that our government rescue plans trump all else.

But here's the rub: government rescue plans historically don't work. Let me repeat that: government rescue plans don't work! They can delay, they can stall, they can draw out, but ultimately they cannot stop the natural progression of the markets. History is replete with this paradigm.

My Momma always says, "There is a time in every problem where it is big enough to see and small enough to solve." That time is long gone and what we have now is the turning point in the problem where it has become so big it swallows itself like a black hole. Historians will point to the stories below as a key turning point in this Greek tragedy of a situation.

China, Japan, Russia, Brazil cut Treasuries holdings in April - Bloomberg

Russian Central Bank to cut US Treasury holdings, according to Interfax - DJ
DJ reports Russia plans to reduce the proportion of gold and foreign exchange reserves it invests in U.S. Treasury bonds, central bank Deputy Chairman Alexei Ulyukayev said, the Interfax news agency reported. Ulyukayev said reserves are just over 30%-invested in U.S. Treasurys at present, but didn't specify by how much that figure would fall. He said reserves would instead be placed on deposit and invested in bonds issued by the International Monetary Fund.

Brazil, Russia trade T-Bills for IMF clout - WSJ
The Wall Street Journal reports Brazil and Russia are set to unload U.S. Treasury bonds as they acquire $10 bln each of new IMF securities designed to bolster the institution's aid programs, officials in the countries said Wednesday. The moves are part of a bid by the so-called BRIC nations to play a bigger role at the IMF and other intl institutions. The announcements helped push Treasury yields to their highest level this year on concern that rising U.S. debt has hurt T-bill demand among big holders of U.S. dollar reserves. Leaders from the BRIC countries, who gather next week in Russia, are seeking to forge a bigger global voice on economic issues for the group. A big part of that is getting more of a say in IMF lending decisions; providing more funding to the institution is a first step toward that. Strapped for cash, the IMF has been designing a bond that would meet the demands of Brazilian and other central banks since Jan. In addition to pledges by Russia and Brazil, China is considering the purchase of up to $50 bln.

India is expected to announce a purchase in the range of the Brazilian and Russian pledges. "This is an investment that Brazil is doing with part of its reserves and making available financing so that the IMF may help emerging countries, especially developing countries which face today a shortage of capital because of the global financial crisis," Brazilian Finance Minister Guido Mantega said at a news conference. While Mr. Mantega said the main intent of the bond purchases is to win a bigger voice at the IMF, the move is a diversification away from U.S. dollar-denominated assets. The IMF bonds would represent about 5% of Brazil's total reserves, which are mostly denominated in dollars.