US: Treasury International Capital

Tue Oct 17 15:00:00 CDT 2017

Actual Previous Revised
Foreign Demand for Long-Term U.S. Securities $67.2B $1.3B $1.2B

A nearly even split between foreign buying of U.S. securities, at $34.6 billion, and U.S. selling of foreign securities, at $32.6 billion, made for a strong inflow of $67.2 billion in long-term securities during August. Foreign accounts were active buyers of U.S. Treasuries at $11.5 billion and heavy buyers of corporate bonds at $19.2 billion. Foreign accounts were also buyers of government agency bonds, at $9.2 billion, but were sellers of equities where the monthly outflow came to $5.4 billion. Selling by U.S. accounts was nearly entirely in foreign bonds. Country data show Chinese accounts raising their holdings of U.S. Treasuries, by $34.5 billion to $1.200 trillion, while Japanese accounts trimmed their holdings by $11.4 billion to $1.102 trillion. Strong inflow of securities is a plus for the U.S. economy, helping to offset the nation's trade and government 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.