US: Treasury International Capital

Wed Jan 17 15:00:00 CST 2018

Actual Previous Revised
Foreign Demand for Long-Term U.S. Securities $57.5B $23.2B $26.2B

Foreign accounts, at $34.8 billion, were active buyers of long-term U.S. securities in November while U.S. accounts, at $22.7 billion, were active sellers of long-term foreign securities, together making for monthly asset inflow of $57.5 billion.

Foreign buying of U.S. equities has been unusually heavy, at $12.7 billion for a third straight rise. Foreigners have also been heavy sellers of U.S. Treasuries of late, at a net $18.8 billion in the month. The heaviest foreign buying in November was in corporate bonds, at $28.7 billion. Buying of agency bonds was also solid, at $12.2 billion.

Selling by U.S. accounts was concentrated in foreign bonds, at $21.3 billion, with selling of foreign equities at $1.4 billion.

Turning to holdings of U.S. Treasuries, both Chinese and Japanese holdings continue to ease, down $12.6 billion in the month for China to $1.177 trillion and down $9.9 billion for Japan to $1.084 trillion. Ireland continues to hold the third spot at $328.7 million with the Cayman Islands in fourth at $269.4 billion.

Foreign demand for U.S. securities is a major plus for the economy, helping to offset the nation's large trade gap and government deficit.

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.