Are Investors Looking For Safe Bets Outside of the U.S.?
The U.S. Treasury Department released Treasury International Capital data for February on Monday. The TIC tracks the flows of financial instruments such as Treasury securities, agency securities, corporate bonds, and corporate equities into and out of the U.S.
Broadly speaking, the TIC provides a measure of foreign demand for U.S. debt and assets. Strong inflows will put downward pressure on interest rates and help maintain a strong dollar. Keep in mind that this data is released with about a two-month lag time.
“The sum total in February of all net foreign acquisitions of long-term securities, short-term U.S. securities, and banking flows was a monthly net TIC inflow of $53.6 billion,” reported the Treasury. “Of this, net foreign private inflows were $44.4 billion, and net foreign official inflows were $9.2 billion.” Foreign residents purchased a net total of $7.6 billion long-term U.S. securities in February. Meanwhile. U.S. residents increased their holdings of long-term foreign securities by $25.4 billion.
Taking into account both foreign and U.S. securities transactions, net foreign purchases of long-term securities were -$17.8 billion. This is down from net purchases of $25.7 billion in January, and widely unexpected. Analysts surveyed by Bloomberg expected net buying of $40 billion for February. Overall, it seems like investors looked for shelter outside of the U.S. in the first few months of the year, which were politically turbulent…
In particular, investors in Japan, Switzerland, and the U.K. reduced their holdings of Treasuries. China remained the biggest foreign holder of U.S. Treasuries, increasing its stockpile by $8.7 billion to a total of $1.22 trillion. Japan’s stockpile fell $6.8 billion to $1.097 trillion.