Replies to post #124 on Currencies (FOREX)

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The TIC will be published Dec. 15 at 14:00 GMT / 9:00 EST.

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TIC data down to $48.1Bn net inflows.

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14:05 US GOVTS: TIC Data Showed Slower Fgn Investment in Oct ($48.1B)] Boston,
Dec 15-- According to the Treasury International Capital (TIC) report foreigners
made a $48.1 bln net purchase of US securities in October, down from a revised
$59.9 bln in September (prev. $63.4 bln). There was a rise in foreign appetite
for Treasuries but it was well shy of its highs of earlier in the year. There
was a rebound in agency purchases as well as equities.
On average inflows are still sufficient enough overall to cover the current
account deficit but the market will keep a watchful eye as the USD remains weak.
At their October pace net investment is insufficient to support the USD.
Foreign net purchases of US Treasuries totaled $18.3 bln in October, up from
$15.8 bln in September. Purchases by foreign official institutions rose by more
than 50% to $14.8 bln from $9.8 bln in September. Other foreigners purchases
fell to $3.0 bln from $6.7 bln. Foreign official holdings totaled $1.125 trn in
October, up from $1.115 trn in September. The rise was a result of increased
investment in Treasury coupons. Overall foreigners hold a little less than 48%
of all marketable Treasury debt outstanding. Foreign central bank holdings of
notes and bonds account for about 33.5% of all notes and bonds outstanding.
It"s not hard to see why the market remains preoccupied with foreign
sponsorship.
In the 12 months ending in October, foreign investors made a $374.9 bln net
purchase of Treasuries, up from $368.4 bln in September. It was just the second
time that the 12-month purchase had risen in the past six months. Foreign
official accounts made a $207 bln net purchase of Treasuries over the year
ending in October. This year alone that purchase has totaled $176.7 bln
compared with a total net purchase of Treasuries of $109.3 bln in all of last
year. So far this year total marketable Treasuries outstanding increased by
$325.3 bln, and note and bonds have increased by only $175.7 bln. The degree of
sponsorship by foreign investors is one reason why rates have stayed low even as
the budget deficit has soared.
Of the major foreign holders of Treasuries, the composition changed. Japan
and trimmed their holdings for a second straight month while the UK increased
theirs by just over $6 bln. China"s holdings were little changed. Since
peaking in August Japan has decreased their holdings of Treasuries by $7 bln
through the end of October. The Japanese held $715.2 bln in Treasuries as of
October 31, down from $720.3 in September and $722.2 bln in August. Their
holdings equate to about 18% of total marketable Treasuries outstanding.
China"s stake was $174.6 bln in October, ups lightly from $174.3 bln in
September. The UK increased their holdings to $140.9 bln from $134.7 bln. This
looks to be a new high. Holdings of Treasuries by Caribbean Banking Centers-- a
fair proxy for hedge funds-- fell by just over $3 bln in October to $85.2 bln.
Foreigners made a $22.0 bln purchase of agency securities, the strongest
purchase since April. This occurred after the dust settled following the OFHEO"s
investigation of FNMA manipulating its earnings. Fed custody holdings suggest
that agency investment by foreign central banks has stayed strong.
In October there was a $19.1 bln purchase of corporate bonds, down sharply
from $43.9 bln in September. There was a $3.76 bln net purchase of US equities
following a $3 bln net sale in September. At the same time US investors sold a
net $12 bln in foreign stocks and a $3.2 bln in foreign bonds.
Complete details can be found on the Treasury"s website at:
http://www.treas.gov/tic/.
The report reinforces rhe importance of foreign investors to the US Treasury
market suggests that the twin deficits -- the budget deficit and the current
account-- will be of utmost important in the coming year. The current account
is approaching a record 5.5% of the GDP and if it continues to deteriorate
foreign inflows may slow. This would spell trouble for the US markets, as well
as the economy. [e-mail]
[TIC YEAR-TO-DATE SUMMARY, mlns$]
------Foreign investment in-------------
Treasury Gov't U.S. U.S. TOTAL
Bonds & Agency Corp. Corp. NET FGN
Notes Bonds Bonds Stocks INVESTMENT
2004-01 48997 27377 12809 12828 91276
2004-02 36705 24247 21051 2488 84638
2004-03 60799 4004 30613 -13481 77598
2004-04 35673 31798 16559 -1922 71782
2004-05 23378 20959 19817 -7679 64974
2004-06 40575 15769 27156 1755 73007
2004-07 13250 19279 28180 9777 61066
2004-08 14427 17489 24430 -1126 54228
2004-09 15779 8095 43930 -3068 67463
2004-10 18338 22002 19154 3760 48063