TIC Report Summary for May

(May 31st 2012) Every month, the US Treasury Department Releases the “TIC Report.” In the broadest sense, the report covers the purchases and sales of US stocks and bonds by foreigners and the governments of foreign countries.

The treasury market tends to react fairly strongly to this report. In particular, the market focuses on the sales of US Treasury bonds to foreign governments with particular attention being paid to China. The concern is that China is going to sell its over $1 trillion of US Treasuries or at very least stop buying them at an aggressive pace.  (Read our article Could China Destroy the Market for US Treasuries?)

The market’s reaction to most current release was muted. The 10 year Treasury yield on May 15th (the date of the release) rose 0.01% to 1.77%.

Key Takeaways from the TIC Report:

  • Net Sale Of US Securities of 49.9 billion in March of 2012 vs an average purchase of $17 billion per month during the last 12  months.
  • Private Investors (Foreigners) reduced their holdings of US Treasuries ($11.1 Billion) but decreased their holdings of long term US securities, including treasuries ($4.0 billion)
  • Foreign governments bought Treasuries ($31.6 billion) but sold government agency bonds ($5.3 billion) like Fannie Mae and Freddie Mac
  • Americans were net sellers of foreign stocks and bonds to the amount $13.9 Billion in March versus an average purchase of $3 billion per month for the last 12 months

 

What is interesting about the data?

Private investors and governments are almost taking opposite actions when it comes to Treasuries. Individuals sold Treasuries, albeit in smaller quantities, while governments lapped up Treasuries in large quantities, driving yields down.

Foreign governments seem to be moving to the safety of US Treasuries (“Flight to Safety”) from the slightly higher yielding but risky Government Agency Bonds.

Americans are bringing money back to the US, reversing the trend of the last 12 months..

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