US: Treasury International Capital

Wed Nov 15 15:00:00 CST 2017

Actual Previous Revised
Foreign Demand for Long-Term U.S. Securities $80.9B $67.2B $73.2B

Unusually strong demand for U.S. equities gave a boost to financial inflows in September which totaled a net $80.9 billion and following a nearly as strong revised inflow of $73.2 billion in August. Foreign private accounts bought a net $23.2 billion of equities in September with foreign official accounts adding $3.0 billion. Private accounts were also heavy buyers of corporate bonds, at $14.1 billion, with Treasuries at $13.1 billion and government agency bonds at $9.1 billion. Foreign official accounts were light sellers in all but equities in the month.

Adding to September's inflow was net selling of $20.1 billion in foreign securities by U.S. accounts with selling centered entirely in foreign bonds which offset light buying of foreign equities. Chinese and Japanese accounts were light sellers of Treasuries in the month with China's holdings at $1.18 trillion and Japan's at $1.10 trillion.

The strong inflow from foreign accounts is a major positive for the U.S. economy, helping to offset the nation's very large 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.