US: Treasury International Capital

Fri Dec 15 15:00:00 CST 2017

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Foreign Demand for Long-Term U.S. Securities $23.2B $80.9B

Foreign buying of U.S. long-term securities was flat in October limiting the month's net inflow to only $23.2 billion. Foreign accounts, both private and especially official, were sellers of Treasuries though private accounts did show some appetite for corporate bonds and government agencies. But, for a second month in a row, it was the stock market that caught foreign interest as private accounts were net buyers to the tune of $13.4 billion following September's $23.2 billion inflow. These are very large readings for U.S. equities which helped offset selling in Treasuries and made for $7.5 billion of net inflow from foreign accounts. Adding to the headline inflow was selling of foreign securities by U.S. accounts, at a net $15.7 billion. U.S. accounts were sellers of foreign bonds but buyers of foreign equities.

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.