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Monthly TIC Data Observations
In order to attempt filling a recent vacuum in public TIC data aggregation and analysis, Zero Hedge is starting a monthly TIC report, highlighting the notable disclosures by the Treasury International Capital System. Today's TIC press release can be found here - in brief:
Net foreign purchases of long-term securities were $90.7 billion.
- Net foreign purchases of long-term U.S. securities were $123.6 billion. Of this, net purchases by private foreign investors were $105.2 billion, and net purchases by foreign official institutions were $18.4 billion.
- U.S. residents purchased a net $32.9 billion of long-term foreign securities.
Foreign holdings of dollar-denominated short-term U.S. securities,
including Treasury bills, and other custody liabilities decreased $19.5
billion. Foreign holdings of Treasury bills decreased $11.3 billion.
Main highlights between the lines:
Foreign purchasers bought a total of $104.2 billion in Long Term securities, consisting almost entirely of treasuries ($100.5 billion). Gross agencies purchased were $5.1 billion, offset by $13.7 billion in paydowns for a net agency reduction of ($8.7) billion. Net Corporate Bonds also declined by a total of ($6.8 billion). Agencies and Corporate Bonds saw declines in foreign holdings in May and April as well. Corporate stock purchases peaked at $19.5 billion in June, after being positive by $16.7 billion in May and $4.6 billion in April.
Chinese purchases of Long-Term Treasuries were sizable at $26.6 billion (including ongoing sales of Agencies and Corporate Bonds for a third month in a row). Chinese treasury purchases in June were stronger than in May and April. It is worth pointing out that while shifting into Long Term securities, China also sold $51.7 billion of Short Term Treasuries (T-Bills), a significant change from prior periods, after it purchased $34 billion Bills in May and sold $14.8 billion in April. Net, China sold $25 billion of treasuries in June, reducing its near maturities and purchasing more long-dated bonds, presumably to take advantage of the higher 10/30 Years yields throughout June.
Surprisingly, the UK purchased the largest amount of Bonds in June, at $45.7 billion, while also purchasing $500 million in agencies, selling $1.1 billion in Corporate bonds, and buying $4.3 billion in corporate stocks.The UK previously purchased $14.2 billion and $22.4 billion of LT Treasuries in May and April, respectively. The UK also sold half a billion in Bills in June.
Japan was also a prominent purchaser of LT Bonds, at $32.8 billion, concurrently selling $2.9 billion in agencies, $2.1 billion in Corporate Bonds and $1 billion in Corporate Stocks. In May Japan sold a total of $4.9 billion in LT securities, with $8 billion in LT Treasuries offset by $2.1 billion in Agency purchases.
In summary - the trend is an accelerating Chinese lack of interest in near-term securities, offset by a moderately increasing appetite for the far end of the curve. In June the UK and Japan compensated for LT Treasury purchases (and of course the Fed was there with POMO to mop up any remaining supply). July data will be very interesting, to see if there was any marked foreign participation in Corporate Stock purchases as the stock market ramped higher by 12%.
As the chart below demonstrates, over the past decade foreign LT rolling LTM purchases have declined dramatically, with the total Agency drop now reaching $184 billion, roughly half a trillion decline from the peak. No wonder the Fed is much more concerned with filling the MBS/Agency vacuum than that of Treasuries: as is evident below, overall there has not been a substantial shift away from Treasuries (yet). Additionally, foreigners have sold over half a trillion in Corporate Bonds since the peak of the credit bubble. In total, since June 2007, Total Long-Term Foreign Holdings have plummeted by over $1 Trillion, across the four primary categories. (chart is gross - does not include agency paydowns, and thus likley understimates the total Agency reduction).
Another interesting data series is the purchase of foreign securities by US citizens: the emerging market bubble in 2008 has obviously peaked, and with a ($32.9) billion decline in June, the repatriation of capital by US residents is accelerating.
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Your the man TD
I believe the correct form is "U Da Man."
he's da 1 fo sho
The Chinese are buying long because thier absence during those auctions would be more noticeable than if they sat out the shorter maturities. Just my thought.
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A short read to get the gist of it: 30 seconds
What the simple graph tells you: priceless
http://dailyreckoning.com/stop-trading/
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"Mother Earth is going to shake us off like a bad case of fleas."
They illegally overtaxed you back then through government scams and are just sitting on billions of it. Tax surpluses is stealing from tax payers. Time to get that money back and force them to lower taxes.
good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions
As you can see, there is still full confidence in the U.S. economy and the U.S. dollar for the long term. Confidence is key and therefore it's almost a waste of time to argue how "fundamentally strong" our economy is so as long as investors (especially China) remain confident.
Now I know many of your disagree, but the recovery from the recession is showing that the policies of Mr. Greenspan, deregulation, and supply-side economics will eventually win the day. Like I have said before, much of this recession has been "mental".
So quit being a bunch of whiners. People will keep buying our treasuries. You could be assured that the good times of the mid-2000s would be returning soon, if it were not for people like Mr. Durden making waves...
-- Phil
Careful Mr. Sockpuppet. You might end up with a case of prostate cancer.
Wonderful performance though.
So, the more china reduced its us treasury holding, the more confidence you have. Right, that means someone else is buying what China is selling (hint: BB?)
Under the same reasoning, the more waves TD made, the more confidence you have because those waves must go somewhere and create something remotely related to GDP.
You are just great Phil... my laugh for the day!
Reagan's deregulation and the Community Reininvestment
Act are what got us into this mess. Red lining area
neighbourhoods was being done for a good reason, that
being the properties represent too high a risk to loan
money on. Somewhere along the way red lining got
turned into a race issue, which is typical given how
fractured, fearful, demoralized and entitlement
possessed America has become today. To say, "You
could be assured that the good times of the mid 2000s
would be returning soon" is not only misleading but
also very naive.
Terry C.
Your greenshoot studded post got me high. Thanx
Actually, you're quite right, 'Phil'. People will keep buying our Treasuries, as is evident in the topmost graph above. The experienced know that Treasuries will preserve capital in a deflationary environment, whereas pudknockers will try their luck at liquidity-inflated assets like gold ETFs and other commodities. Let's see how copper holds up when Shanghai and Hong Kong shoot the falls.
"If you are willing to tackle the tough issues, you don't need to worry about stepping on anyone's toes; they will stand aside and shove you to the front." That is a good quote Phil, too bad they weren't talking about you. Grow a pair and get the audit of The Fed done.
Buying Treasuries...whatever. If China thinks there is a bottom in the California housing market by buying MBS there--then they are as stupid as Japan when they bought up downtown LA in the late 80's. Can't wait for the Alt-A's to give it to them prison style. The ultimate truth is, they need the US, they can't hedge away their dependency on exports to us, they do not have organic growth if you look at how they calculate GDP, and they are going down with the rest of us...for at least the next 2 years.
Looks to me like China's switching strategies. They were Treasury gluttons until yields scraped nil, then they diversified away into "hard assets" or commodities that have a practical application if worse comes to worst. Well, lax lending/collateral standards allowed Chinese speculators to leverage up, drawing more commodities into their boarders. (We all know this story by now.)
The US has done so much to pin down the front end of the yield curve. That front end is fighting to rise to a more natural equilibrium--void of Fed intervention, enhanced LIBOR, fake economic/corporate earnings. Rising front rate bear huge repercussions for banks, federal program investments, and consumers/homeowners... I'm shaking.
The pairs trade: short the short end, long the long end. A flattening yield curve is some combination of rising ST & falling LT rates. Well, my money [should be] on ST rates snapping more higherer once the Fed stops intervening.
TD
Thanks for givin' me the adult ADD version.
What was the question again?
Cheeky's front and center on Drudge right now.
Cheeky is probably doing his happy dance (don't want the visual) given what is going on with Shanghai and Hang Seng right now.
The Chinese collapse is not a given just yet. The Chinese central bank is dropping their recent campaign of raising yield support within their money market. That will pump liquidity right back into stocks. Obviously, the most effective manner in which one can avoid responsibility is to just flow with the ch'i. "C'mon, man, everybody's doin' it."
Meanwhile, the jumper seeks a taller building.
TD, you do a much better job than Setser, who always had a 'China will always work with us' tilt, it seemed to me.
Seems as if there are always someone to buy Treasuries, no matter what.
Might be the Asians, might be the Fed, might be panicked hedge funds, might be scared grandmas chased out of their stocks in a selloff.
Anyway, yields are still near 40-year lows and the 25+ year bull market in Treasuries is still intact for now.
There is a reason for that. Now that the U.S. Government is effectively the lender of last resort and, unless a global governance structure cannot be established before, the first domino to fall when the next crisis hits; when the shit hits the fan you want to be a creditor to the government -- the bigger the better -- as it is likely to gain you preferential treatment when the assets of the country are liquidated.
I have dibs on Yellowstone National Park, the machinery and intellectual property of the U.S. Mint, and all functioning nuclear equipment - military or otherwise.
you are wrong. governments default on debt. It has a 100% record throughout history. Lend to a government in trouble = loose your money.
The upside breakout in the second chart is staggering.
Was the significant shift caused by anything other than the concepts underlying the "decoupling trade" trickling into the mainstream conversation (i.e. frequently discussed in the financial MSM)?
Whatever the explanation, the image perfectly captures herd mentality.
Other Asian nations continue to buy treasuries - their motive though is security concerns regarding China's rise.
http://debtsofanation.blogspot.com/2009/06/debts-of-lenders-americas-pac...
Is those so surprising?
Japan, Taiwan, and other pacific states are bound to pick up any Chinese slack.
http://debtsofanation.blogspot.com/2009/06/debts-of-lenders-americas-pacific.html
These flows are so monstrous. In and out. There has to be some kind of backstop on the currency side. A FOI request to see one of the many FED currency swap agreements would be interesting.
Indeed.
Follow the FX and potentially any other curious swapping of bonds/liabilities by the usual suspects. I add this simply because the Fed has utilized the PD's in interesting ways recently.
How the *#$^ are the brits able to afford that much paper... Currency swap?
It aint the Brits - the UK money I bet is mostly petrodaolars from Saudi Arabia, Kuwait, UAE , Russia etc.
It aint the Brits - the UK money I bet is mostly petrodaolars from Saudi Arabia, Kuwait, UAE , Russia etc.
it could be the bruises talking, but doesnt the second chart look just like a red and blue swan? or is this some sort of reverse rorschach.
dude, observe http://coquinadaily.com/daily/imagesdaily/071122/wildturkeyeasternus.jpg
It's the extremely rare Loch Ness formation. Precedes us carrying our food around in the intestines of a sheep.
http://www.prontohotel.com/blog/wp-content/uploads/2009/02/loch-ness-monster.jpg
Tyler why do you think the Chinese came here? Seriously
TTT and Fed said they would buy their agency crap as long as they took that money to buy Treasuries.
The Fed buys it (w/o having to go to congress) then the Fed just puts it to Treasury...thereby circumventing Congress all together...Congress is so f*&king dumb
How would the bond issuance look in the first graph?
To me it looks that foreigners are not buying a lot right now, neither do locals, but the treasury is selling record amounts. The rest might be monetization.
Yesterday’s Treasury Capital Flows Report continues to draw my attention. For over 2 years I have believed official U.S. policy is to lie to the public (propaganda), manipulate the markets and use the printing press to attempt to keep the system together. Whatever the markets perceive to be a problem the government miraculously fixes it; yet, the real economy just continues to worsen (unemployment continues to rise, high paying manufacturing jobs continue to leave the country and real personal incomes continue to fall). For example, in the 90’s unemployment was considered to be a problem. While Rubin and Summers were Treasury Secretary’s, someone decided an easy fix was to eliminate the worst zip codes from the sampling and U-3 was created. The government now claims unemployment is 9.4% instead of the previously reported U-6 rate which is currently 16.8%. The media then reports the new number in true propaganda style.
Yesterday, the government reported the largest single monthly purchase of Long Term Treasuries in U.S. history. Indeed the Wall Street Journal this morning printed a chart of this series on the front page with accompanied headline “Foreign demand for U.S. Treasurys surged in June”. When you read the press release: the first summary conclusion is “Net foreign purchases of long-term U.S. securities were $123.6 billion. Of this, net purchases by private foreign investors were $105.2 billion,”
http://www.ustreas.gov/press/releases/tg263.htm
When you look into the details of the report what becomes clear is Foreign “official” purchases of Treasury Bills & Notes was a combined negative $7B. This is quite a discrepancy, with dramatically different financial scenarios moving forward. Intelligent private investors around the world are currently worried about historically unsustainable U.S. Budget Deficits and the amount of bonds to be issued. Our Treasury’s cash flow statements are currently melting down. In the month of July we had a $180B Budget Deficit. Intelligent investors around the world are worried about the future value of the dollar, since the Federal Reserve has embarked on an unprecedented monetization of these record deficits. Foreign central banks have stopped supporting the “Government Finance” Bubble. At this time in history we are supposed to believe intelligent private investors stood up and purchased record amounts of Long Term Treasury Securities. If this is really U.S. hedge funds, investment banks or something similar financed from U.S. official sources, then the system is a lot closer to the edge than this report would suggest. This would simply be back door monetization. On the other side if this is actual purchases by foreigners who are willing to accept 3% interest on a bankrupt country, then we can go on living beyond our means for another month. Here is the link come to your own conclusion: http://www.ustreas.gov/tic/mfh.txt .
What sticks out to me is since the Fed made monetization of our debt official Federal Reserve Policy in March, private investors in the United Kingdom have bought $85.2B in Treasury Notes. In the month of June they bought an eye popping $50.2B. This is not showing up in foreign official holdings so we can assume some private entity In Britain decided to make a major bet on the direction of U.S. interest rates and the $U.S. Since the fine print says “United Kingdom includes Channel Islands and Isle of Man”, it is not unreasonable to assume that some hedge fund or investment bank in the known tax havens is responsible for this bet. Until the Federal Reserve and the powers to be stop fighting the audit the Fed Bill and I would add audit its primary dealers, we may never know the truth. Until then Caveat Emptor.
What is the statment assertsining?
They illegally overtaxed you back then through government scams and are just sitting on billions of it. Tax surpluses is stealing from tax payers. Time to get that money back and force them to lower taxes.
good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions
Seems to me also that the UK purchases might be driven by fear of holding UK gilts and or having exposure to the UK banking system right now. Apparently Northern Rock has ceased interest payments on it's bonds, who will the holders sell them to now? This was probably someone that got advance notice of that announcement and headed for the hills. At least the US will still print money to pay the interest on it's notes and bills even though it is scant interest.