US: Treasury International Capital

Fri May 15 15:00:00 CDT 2015

Actual Previous Revised
Foreign Demand for Long-Term U.S. Securities $17.6B $9.8B $20.9B

After only a single month in second place, China is back on top as the biggest holder of US Treasuries at $1.261 trillion in data for March. This represents heavy net buying of $37.3 billion in the month. Japan, which in February held the number one spot for the first time since 2008, fell back once again to second with holdings little changed at $1.224 trillion.

There was extremely heavy selling of Treasuries out of Belgium where holdings fell nearly $100 billion in the month to $252.8 billion. OPEC is now in third place at $297.3 billion of US Treasuries with Caribbean Banking Centers, a favorite spot for hedge funds, in fourth at $293.0 billion.

Net inflow of long-term securities held steady in March at a moderate $17.6 billion vs an upwardly revised $20.9 billion in February. The latest inflow was led, despite the selling out of Belgium, by foreign buying of US Treasuries followed by foreign buying of US corporate bonds and US government agency bonds. Foreigners were net sellers of US equities in the month at a heavy $15.0 billion. US accounts were heavy buyers of foreign equities, at $19.0 billion which was offset in part by $5.3 billion of net selling in foreign bonds.

These Treasury data track the flows of financial instruments into and out of the United States. Instruments tracked include Treasury securities, agency securities, corporate bonds, and corporate equities.

TIC data have been issued for the past 30 years, but only recently, due to an enormous rise in foreign participation in our markets, have they grabbed the attention of the international financial markets. Although methodologically limited, TIC offers a measure of foreign demand for our debt and assets. Bonds and the dollar are most sensitive to the data, therefore bond and foreign exchange markets are more likely to react to this report than the equity market. Strong inflows (demand for U.S. securities) are needed to keep downward pressure on interest rates. Strong inflows also underpin the value of the dollar since foreigners must purchase dollars in order to buy our securities. A strong dollar helps to maintain stability in all U.S. financial markets. Since foreign ownership of U.S. equities is comparatively small, the equity market is less concerned about this report.