US: Treasury International Capital

Mon Jun 15 15:00:00 CDT 2015

Actual Previous Revised
Foreign Demand for Long-Term U.S. Securities $53.9B $17.6B $25.6B

Foreign accounts were net buyers of $41.2 billion of US long-term securities in April while US accounts were net sellers of $12.8 billion of foreign long-term securities, bringing the net long-term inflow to a respectable $53.9 billion in the month. March is revised upward to a net inflow of $25.6 billion.

Turning back to April, foreigners were heavy buyers of government agency bonds in the month, at $30.2 billion, and were also buyers of Treasuries, at $6.4 billion, and corporate bonds, at $4.2 billion. Foreign buying of US equities, as it has been all year, was negligible in the month, at a net $0.3 billion.

In contrast, US accounts have been heavy buyers of foreign equities all year, at a net $20.7 billion in April, and have been sellers of foreign bonds, at $33.5 billion in the month.

China is the largest holder of long-term US Treasuries, at $1.26 trillion for a small gain in the month, while Japan is second, at $1.22 trillion for a small decline. Caribbean Banking Centers, a favorite location for hedge funds, are the third largest holder at $296 billion for a small gain in the month.

Strength in the dollar may hurt US exports but it helps boost foreign interest in US securities, which in turn helps the US offset its large government and trade deficits.

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.