Bank of NY Analysis of US Treasury TICS Report

[sharon sanders]

US Treasury's TICS Report

Michael Woolfolk


5/15/2008




The US Treasury released its monthly TICS capital flow data this morning, indicating that US net (long-term) portfolio investment rose to 80.4B USD in March from 64.9B USD in February, on expectations of 62.5B USD. Downward historical revisions offset the reposrt's positive surprise, with February revised to 64.9B USD from 72.5B USD. Separately, the so-called Total TICS number collapsed to -48.2B USD on expectations of +67.5B USD, from an downwardly revised 48.9B USD in February. The difference between the Total TICS number and the headline TICS reflects the net foreign purchase of USD deposits and short-term fixed income securities of 12 months maturity or less. The -128.6B USD net selling of USD deposits and short dated securities in March, from a net sale of -23.6B in February, suggests renewed liquidity problems among foreign investors in March - perhaps triggered by the Bear Stearns crisis. Foreigners bought a net 55.0B USD in US Treasury bonds (from 20.6B USD in February), bought a net 18.3B USD in US agency bonds (from 36.9B USD), sold a net -4.6B USD in US corporate bonds (from +19.2B USD), and bought a net 11.5B USD in US equities (from 1.1B USD). At the same time, US investors bought a net 4.0B USD in foreign equities (from 18.3B USD in February) and sold a net -4.2B USD in foreign fixed income (from -5.3B USD).
The headline TICS number was driven by a surge in foreign buying of US Treasury bonds, offset by a decline in foreign net purchases of US agency and corporate bonds. On the equity side, foreign demand for US equities increased markedly to 11.5B USD from 1.1B USD, while US investment in foreign equities dropped to 4.0B USD from 18.3B USD in February. The net inflow of investment from equities stands in stark contrast to the remarkable net sale of -128.6B USD of deposits and short-dated securities in March. The sharp outflow from US short-term securities can be characterized as renewed liquidity concerns proximate to the Bear Stearns crisis and its immediate aftermath. That said, renewed foreign buying of US equities is a strong vote of confidence in both the USD and the US stock market, despite both clearly on the ropes during March, and reflects the willingness of global investors to "bottom fish" ahead of the next rally in equity prices. While today's TICS report may not be the USD positive that the headline suggested, it will most assuredly be a one-off with a return of net inflow into US deposits and short-date securities during April and May.
The market reaction to the TICS report was clouded by the release of Empire Manufacturing, Industrial Production and the Philly Fed survey. While Empire Manufacturing and Industrial Production disappointed, the Philly Fed survey fell less than expected for May. The simultaneous release of various manufacturing-based reports in addition to TICS report being something of a mixed bag, left the USD largely unchanged since the NY open. The EUR/USD initially rose as high as 1.5518 from 1.5480 following the TICS and production numbers, but proceeded to trade back to 1.5475 by 10:15am aided by a positive Philly Fed number. For its part, GBP/USD saw a more muted reaction to the US data, remaining range-bound between 1.9410 and 1.9450. Separately, USD/JPY fell as low as 104.50 by 9:30am from 105.05 following the Empire Manufacturing report, trading back to 104.80 by 10:15am. For its part, USD/CAD was range-bound just above the 1.0000 parity level as another surge in crude oil prices maintained confidence in the loonie. Today's TICS report failed to live up to the expectations that USD bulls had hoped for, leaving the USD rally in search of a fresh catalyst. Unless one is found before the weekend, players may well decide to square up positions for now - content with the greenback off of recent lows and in the midst of well-worn ranges.

https://gm.bankofny.com/Research/FXComment.aspx?ReadMore=Yes&ContentManagerID=7286#

 

[sharon sanders]

Re: Bank of NY Analysis of US Treasury TICS Report

referenced data from above analysis -

Treasury International Capital (TIC) Data for March

http://www.treas.gov/press/releases/hp977.htm

Treasury International Capital (TIC) data for March 2008 are released today and posted on the U.S. Treasury website (www.treas.gov/tic). The next release, which will report on data for April, is scheduled for June 16, 2008.
Net foreign purchases of long-term securities were $80.4 billion.

• Net foreign purchases of long-term U.S. securities were $80.2 billion. Of this, net purchases by foreign official institutions were $48.1 billion, and net purchases by private foreign investors were $32.1 billion.

• U.S. residents sold a net $0.3 billion of long-term foreign securities.

Net foreign acquisition of long-term securities, taking into account adjustments, is estimated to have been $54.2 billion.
Foreign holdings of dollar-denominated short-term U.S. securities, including Treasury bills, and other custody liabilities increased $13.5 billion. Foreign holdings of Treasury bills increased $27.8 billion.
Banks’ own net dollar-denominated liabilities to foreign residents declined $115.9 billion.
Monthly net TIC flows were negative $48.2 billion. Of this, net foreign private flows were negative $57.6 billion, and net foreign official flows were $9.3 billion.