How Badly Do Foreign Investors Want U.S. Securities?
The U.S. Treasury Department released Treasury International Capital data for March 2013 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. This information is still relevant to investors because of its impact on bond and foreign exchange markets. Given the relatively low levels of foreign ownership of U.S. equities, the report is not as relevant to the equity investors.
“The sum total in March of all net foreign acquisitions of long-term securities, short-term U.S. securities, and banking flows was a monthly net TIC inflow of $2.1 billion,” reported the Treasury. “Of this, net foreign private inflows were negative $34.8 billion, and net foreign official inflows were $36.9 billion.”
Taking into account both foreign and U.S. securities transactions, net foreign purchases of long-term securities were -$13.5 billion. This compares against net purchases of -$17.8 billion in February, and is just about in line with economist expectations.
Foreign accounts bought $15.3 billion worth of U.S. securities in March, while U.S. accounts bought $28.8 billion of foreign securities, yielding the -$13.5 net total. While the volume of foreign purchases was relatively modest, the total for U.S. purchases in March was relatively enormous — approaching 2012′s net total of $35.4 billion.
Backed by this news and data out of Europe that showed the region mired in recession for the first quarter, the euro dropped to its lowest level in more than a month against the dollar.