Treasury International Capital (TIC) Data
July TICS data shows a drop in net purchases of L/T US Treasuries
The July TICS data showed a relatively small inflow of USD 15.3bn of net long-term securities, versus USD 90.2bn in June and expectations of USD 60bn (Bloomberg). Looking at the breakdown, one observes that net purchases of long-term US Treasuries (from private and official accounts) dropped significantly to USD 31.1bn from USD 100.5bn. This was largely driven by the significant drop in net private purchases to USD 15.3bn from a high USD 78bn in June. Official net purchases of long-term Treasuries dipped only slightly to USD 15.8bn from USD 22.5bn.
Meanwhile, official net purchases of T-bills increased from -USD 14.5bn in June to +USD 34.9bn in July. The notable activity here is that there was reduced buying of long-term US Treasuries (particularly from private flows), while net T-bill purchases increased in July, by official accounts. Meanwhile, net purchases of foreign securities by US residents persisted, totaling USD 28.8bn in July versus USD 33.4bn in April. This reflects ongoing demand from US residents for purchases of offshore assets. The overall monthly net TICS flows data (which is the broadest measure) still shows a significant outflow of USD 97.5bn, following USD -56.8bn in June and -USD 57bn in May. In addition, contrary to speculation that China has started to dump its dollar assets, its overall holdings of US Treasuries increased by USD 24bn in July (after a surprisingly large fall of USD 25.12bn in June) – not dissimilar to any single monthly gain at the peak of its Treasury buying last year. China's total holdings of US Treasuries now stand at USD 800.48bn, a bit lower than its the peak of USD 801.51bn in May, but narrowing the gap from June. July was another month of significant buying at the long end. China bought 15.26bn of long-term Treasuries (after a massive purchase of 26.6bn in June, up from 4.03bn in May).
Meanwhile, China continued to sell agency bonds – USD 2.16bn worth in July alone (compared to USD 0.62bn in June). In terms of T-bills, it bought USD 8.84bn in July versus USD 51.75bn in June. As the latest TICS data shows, China has not yet stopped buying US debt. President Hu Jintao's week-long visit to the US next week, to attend the UN Climate Summit (22 September) and the G20 in Pittsburgh (24-25 September), will provide a stage for China to again voice its concerns over the safety of its dollar assets, among many of its other concerns. The latest warning by former Federal Reserve Chairman Greenspan over the “very dangerous” level of US national debt could be echoed by the Chinese and other emerging-market representatives at the meetings.
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