Foreign accounts were net sellers of U.S. long-term securities in September, decreasing their holdings by $2.4 billion. Taking into account net sales of foreign long-term securities by U.S. accounts, at $0.7 billion, the net outflow for September came to $1.7 billion, compared with a revised inflow of $62.2 billion in August.

Net sales of Treasury bonds and notes by foreign accounts, at $17.5 billion, contributed to the outflow which was led by net sales of U.S. equities, at $24.6 billion. Foreign account, however, did purchase a net $16.2 billion of corporate bonds and $23.4 billion of government agency bonds. U.S. accounts purchased a net $0.7 billion of foreign securities.

Among top foreign holders of U.S. Treasuries (long and short-term), Japanese accounts cut their holdings to $1,087.7 billion in September from $1,116.2 billion in August. Chinese accounts cut holdings to $778.1 billion in September from $805.4 billion in August.

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 since the 1970s, 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.