Investor makes huge withdrawal from BlackRock; (NYSE: BLK) was it due to the dollar?

The investment world was abuzz this week with news that an Asian institutional client made a $52 billion withdrawal from BlackRock (NYSE: BLK), the world’s biggest money manager.

The move came in lower-fee index investments, primarily fixed-income. The investor wasn’t identified. But with a move that big, it could have been a central bank.

In any case, everyone is wondering why the investor dumped bonds. No one knows for sure, of course. But there are several possibilities.

It could be that the investor had a cash need, and U.S. bonds are among the easiest assets to sell given the market’s huge liquidity. It also could be that the investor soured on U.S. bonds. Long-term interest rates have been rising recently, making bonds less valuable. And they may continue to do so, given the huge U.S. debt burden. U.S. government debt totals $36 trillion, more than 100% of GDP. 

In light of the debt and the brouhaha surrounding U.S. tariffs, some experts have speculated that U.S. Treasuries will lose their status as the world’s safe haven asset. But other nations have huge debt loads too, including China and Japan. And unless the tariffs lead to a global economic meltdown, which now seems unlikely, Treasuries’ exalted status will probably stay in place.

Little alternative to Treasuries; what about the dollar?

Despite the huge U.S. debt burden, there doesn’t seem to be an alternative to Treasuries for investor safety. Europe has no coordinated fiscal policy, and its bond market isn’t nearly as deep as the U.S. 

China’s fixed-income market is government-controlled, taking away from its attractiveness. And Japan’s economy has largely been a basket case for the last 35 years, so it’s not likely to become a safe haven.

Another possible reason for the investor’s big fixed-income sale could be the dollar’s weakness. A falling dollar lessens the value of U.S. bond proceeds when they’re converted into foreign currency.

The Bloomberg Dollar Spot Index has slid 8.5% over the past year. That may not sound like much, but currencies are generally much more stable than stocks. The dollar fell by more in the first half of this year than in any similar period going back to 1973.

Fear about the implications of tariffs and the explosion of U.S. debt have pushed the dollar down. 

If it keeps sinking, perhaps that will spark more selling of U.S. bonds. But keep in mind that it’s very difficult to predict the dollar’s path. There’s no guarantee that the dollar will keep sliding. And even if it does, there’s no guarantee that would lead foreign investors to sell bonds.

On this subject, it’s more about coming up with questions than answers.