TIC Long Term Purchases (Dec) Actual 34.8B, Expected 20.0B, Previous -25.6B (Revised from -21.7B)
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: Net foreign purchases of long-term securities were $34.8 billion in December, the Treasury Department said today, as foreign investors bought the most corporate debt since June. Net foreign purchases of long-term U.S. securities were $22.4 billion. Of this, net purchases by private foreign investors were $25.2 billion, and net purchases by foreign official institutions were negative $2.8 billion. U.S. residents sold a net $12.4 billion of long-term foreign securities.
At the end of December (latest data), China increased its holdings of Treasuries by 2.09% to $696.2 billion from November. For the year, China's holding increased by 45.77%. Beginning in September 2008, China became the largest foreign holder of U.S. debt, supplanting Japan.
Japan remained the second-largest holder with $578.3 billion as of December, a 0.13% increase from November. For the year, Japan decreased its holdings by 0.28%.
The U.K. is the third largest holder with $355.0 billion, a decrease of 0.42% from November but an increase of 124.82% for the year.
International investors bought a net $41 billion in U.S. corporate debt in December, after five straight months of net selling, the report showed.
Net foreign purchases of Treasury notes and bonds were $14.9 billion, compared with sales of $25.8 billion a month earlier. Net purchases of Treasury bills were $25.3 billion, down from $82.1 billion in November.
Net foreign official selling of long-term U.S. assets totaled $2.8 billion, after net sales of $37.1 billion the previous month, the report showed.
Foreign demand for U.S. agency debt from companies such as Fannie Mae and Freddie Mac continued to slide, with net sales of $37.4 billion after net selling of $22.5 billion in November.
Forex Technical Reaction: S&P futures are just off the low of the session with a decline of 3.02%. The dollar has gained overnight against the higher-yielding euro, pound and Australian dollar.
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