Release Explanation: The Treasury Investment Capital (TIC) report is a measure of foreign investment flowing into the US Equity, Treasury, and Bond Markets, minus the amount of US investment heading abroad. It is important since a certain amount of foreign investment is currently needed in the US to fund our “twin deficits” the Trade and Current Account Balances. Trade and Current Account Balances: the size of the US Public debt and Imports exceeding Exports means the US needs foreign investment to fund the shortfalls. A miss on the TIC Data moves the Markets one way or the other because Institutions have to realign existing positions in response to the next Quarter and half Year targets.
Money that flows into or out of US Markets will always impact the US Dollar, an increase in overseas investments can only be funded in US Dollars so a local Currency is being sold, US Dollars are bought, and then those US Dollars are transferred into Treasuries. By the time this report is released, this process of swapping Currencies has already happened and may not have an instant impact on the US Dollar. It does however give a good idea of the US Dollar sentiment.
Trade Desk Thoughts: Demand for U.S. financial assets declined in January as China made its smallest net purchase since June. Net sales of stocks, notes and bonds were -$43 billion after increasing by $34.7 billion in December, the Treasury Department said today.
Chinese Premier Wen Jiabao said last Friday he was worried about china's U.S. investments.
Apparently, foreign investors closed their dollar positions in January said Matthew Carniol, chief currency strategist at TheLFB-forex.com. Investors are concerned about getting their money back more than any potential appreciation.
Foreign demand for U.S. agency debt (Fannie Mae and Freddie Mac) continued to slide for a fourth straight month, with net sales of -$22.5 billion. Net foreign purchases of U.S. equities were $1.4 billion in January, after net purchases of $3.9 billion the previous month.
China, the largest foreign holder of U.S. debt, bought $12.2 billion of Treasuries in January. For the year, China increased its purchases of Treasuries by 50.14%, less than the 52.3% for the year to December. Japan, the second largest foreign holder, bought $8.8 billion of Treasuries in January.
Brazil, the sixth largest holder, bought $6.5 billion, a 5.11% increase. Brazil holds just over $1.8 trillion in foreign currency reserves, according to the latest International Monetary Fund data. For the year to January, Brazil decreased its holding by 6.14%.
The U.S. is more dependent than ever on foreign purchases of U.S. debt, as it seeks to implement an $800 billion stimulus plan which will increase the fiscal 2009 budget deficit to an estimated $1.5 trillion.
Forex Technical Reaction: Stocks were recently coming off their highs of the session, and the dollar was gaining against the better-yielders as stocks declined.