US: Treasury International Capital

Thu Mar 15 15:00:00 CDT 2018

Actual Previous Revised
Foreign Demand for Long-Term U.S. Securities $62.1B $27.3B $23.3B

Foreigners were once again major investors in the U.S. stock market during January, helping to drive a large $62.1 billion of net long-term investment inflow in the month. Foreign accounts, almost entirely private ones, invested a net $34.5 billion into equities for what is the fifth straight positive month and one of the largest on record.

Foreign accounts were, in contrast, small net sellers of corporate bonds but were major buyers of government agency bonds and also Treasury bonds. Country data show a sizable $16.7 billion decline in Chinese holdings of Treasuries, to $1.168 trillion in January, with Japan in second place just more than $100 billion behind with a $4.3 billion rise to $1.066 trillion.

U.S. accounts were small net buyers of foreign securities, at $1.1 billion in the month, which for the report's headline is subtracted from total foreign buying of U.S. securities of $63.2 billion. Large financial inflows help offset the nation's growing 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.