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Economy in Brief

Treasury TIC Data Show Moderate Foreign Purchases of U.S. Securities; Equities Remain Firm
by Carol Stone  June 17, 2011

Foreign investors purchased $44.8 billion worth of U.S. long-term debt and equity securities in April, according the U.S. Treasury's International Capital ("TIC") data, which were published Wednesday. This followed $54.7 billion worth in March, continuing the more moderate pace of acquisitions first seen in February. As seen in the table, during 2010 their monthly net purchases averaged $75.9 billion, a rate that extended through January.

The slowdown has mainly involved Treasury debt. Monthly net purchases averaged $58.8 billion during 2010, while the last two months were $23.3 billion (April) and $26.8 billion (March). Purchases of other debt have been uneven: foreign investors seem to have picked up their acquisition of federal agency securities, with $7.5 billion and $9.5 billion in April and March, respectively, after a net liquidation in February. The $9 billion monthly pace of acquisition is a far cry from the days before 2008 when these organizations were healthier, and foreign purchases averaged $18 billion a month for several years, but this positive volume is better than the liquidation of these holdings that took place in 2008 and 2009. Foreign investors' holdings of corporate debt, by contrast, remain in the irregular pattern that has characterized that sector for the last three years, with fairly modest monthly ups and downs; the last period of sustained gain in foreign holdings of corporate bonds ended in 2007.

Corporate equity acquisition, though, has continued firm. Foreign net purchases of U.S. corporate stocks averaged $9.1 billion last year, and they reached $14.7 billion this March and $17.8 billion in April. It's likely that they have retreated in very recent weeks along with the downturn in stock prices, but the persistent strength in those data is encouraging. It's also interesting to note that the buyers of equities tend to be from different countries than the debt purchasers. Equity demand comes from investors in Caribbean financial centers, especially the Cayman Islands, and Europe. Buyers of significant amounts of Treasuries include China, at $9.4 billion in April, and the financial center in the U.K., with net purchases of $13.2 billion in April. April also featured a substantial $16.2 billion from Brazilian investors, who had purchased $3.9 billion in March, $3.1 billion in February and a huge $18.0 billion in January. So perhaps we need to monitor all of the BRIC countries in these financial data more than we have before.

The TIC data are found in Haver’s USINT database. The information there also includes aggregate flows in Treasury bills and other short-term assets as well as banking system data on claims on and liabilities to foreign Counterparties.

Net Foreign Purchases of Long-Term U.S. Securities (Bil.$) Apr Mar Feb Apr'10 Monthly Average
2010 2009 2008
Total 44.8 54.7 32.4 107.1 75.9 53.2 34.6
  Treasuries 23.3 26.8 30.6 77.2 58.8 44.9 26.2
  Federal agencies 7.5 9.5 -1.5 12.4 9.0 -1.0 -3.2
  Corporate bonds -3.8 3.8 -2.5 7.7 -1.0 -3.4 7.8
  Corporate stocks 17.8 14.7 6.1 9.8 9.1 12.7 3.7
China (All security types) 4.5 -3.8 4.5 6.2 2.0 8.2 10.9
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