US: Treasury International Capital

Fri Jun 15 15:00:00 CDT 2018

Actual Previous
Foreign Demand for Long-Term U.S. Securities $93.9B $61.8B

Heavy selling of foreign stocks and bonds by U.S. accounts inflated headline net inflow of long-term securities, at $93.9 billion in April. U.S. accounts sold a net $71.4 billion of foreign securities, split roughly evenly between stocks and bonds, while foreign accounts bought a net $22.5 billion of U.S. securities which is a moderate total. Foreign buying was centered in U.S. government agency bonds and also equities where net inflow was a solid $4.9 billion in the month. Private foreign accounts were unusually large buyers of U.S. Treasuries, at $43.5 billion, which was offset however by $48.3 billion of selling by foreign central banks. There's no evidence of Chinese trade retaliation in April's data as the country's holdings of U.S. Treasuries held steady at $1.182 trillion.

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.