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Economy in Brief

TIC Data Show Sizable Foreign Interest in US Securities Even Through June; Hong Kong, Russia & Brazilian Investors Major Buyers
by Carol Stone August 16, 2007

The US Treasury's monthly "TIC" data were reported yesterday for June. They indicate that foreign interest in US capital markets remained strong with the same magnitude of net flows into the US as occurred in May, the record period. Foreign investors bought $148.6 billion of US securities compared with $163.7 billion in May and "just" $91.8 billion in June 2006. At the same time, US investors bought $27.8 billion of foreign securities in June, noticeably less than May's $37.6 billion, but still historically large.

The mix of US securities purchased by foreign investors shifted considerably from May to June. After May's outsized amount of corporate bonds, $72.6 billion, they bought only about one-third as much in June, $25.9 billion. Purchases of equities also decreased, from $42.0 billion in May to $28.8 billion. But net buying of federal agency and Treasury securities both established new records: agency debt advanced from $27.5 billion to $39.7 billion and Treasury purchases from $21.6 billion to $54.3 billion.

Last month, we commented here on the increased participation by Chinese investors in US markets. This expanded further in June, with $20.2 billion in net purchases, up from $10.1 billion in May. The London markets reduced their US buying, but at $66.7 billion, it remained large compared with both most previous periods and other investment centers. Speaking of other investment centers, a number of them were active in June: Hong Kong investors bought, on net, a record $13.3 billion; the Cayman Islands, $11.1 billion, about average for them; and Russia $6.6 billion, also a record and following $6.0 billion in May. The one we found interesting was Brazil, whose investors purchased $10.1 billion in June and a total of $20 billion during the second quarter. The June amount was more than accounted for with $12.2 billion in Treasuries. Euro-Zone investors, by contrast, were net sellers of $20 billion in US securities markets in June, consisting of a large portion of foreign stock sales to US investors.

Monthly Averages
Net ForeignPurchases fromUS Residents, Bil $ June 2007 May 2007 June 2006
Last 12 Months 2006 2005 2004
"Headline": Net Foreign Purchases  = 1 + 2 120.9 126.0 83.5 81.4 73.7 69.9 63.6
Domestic Securities 148.6 163.7 91.8 107.0 94.6 84.3 76.4
   Treasuries 54.3 21.6 28.7 22.1 16.3 28.2 29.3
   Agencies 39.7 27.5 23.0 24.5 24.1 18.3 18.9
   Corporate Bonds 25.9 72.6 41.7 43.6 41.7 31.0 25.8
   Equities 28.8 42.0 -1.6 16.9 12.5 6.8 2.4
Foreign Securities  -27.8 -37.6 -8.3 -25.7 -20.9 -14.4 -12.7
Net Foreign Acquisition 107.0 112.5 67.8 67.9 60.7 58.3 60.4
Total TIC Flows  58.8 107.3 -2.6 73.6 87.4 55.7 81.6
Select Countries Net Purchases of US Securities
China 20.2 10.1 12.2 11.0 9.1 7.2 3.9
United Kingdom 66.7 92.7 57.2 47.0 38.7 30.3 21.2
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