Mortgage Backed Securities: Foreign Accounts Big Buyers Of Long-Term U.S. Debt In March
The U.S. Department of the Treasury today released Treasury International Capital (TIC) data for March 2010. TIC data showed a sharp increase in monthly net holdings in March, as well as another record in total holdings.
TIC data, which tracks foreign purchases and holdings of US securities, showed a sharp increase in monthly net holdings in March, as well as another record in total holdings.
The strong results come as no surprise considering recent trauma in foreign markets, centering on Greece's sovereign debt concerns. That weakness is the US's strength as all manner of dollar-denominated assets experienced unparalleled levity in March.
1. shows the three recent net purchase amounts of 82.2 bln, 36.2 bln, and 51.5 bln followed by March's 157.7 bln. (following chart shows how this figure has moved over time)
2. net holdings of agency debt have been a severe laggard in TIC data. March data shows a pronounced uptick vs. the past 3 reports.
3. unlike foreign accounts, US accounts were net sellers of foreign securities.
4. examining the "long term" portion of the TIC data, the increase vs. previous months is even more pronounced, 140.5 bln vs. 63.3 bln, 15 bln, and 47.1 bln.
5. short term securities go positive this month after several negative months.
6. Banks decreased the dollar-denominated liabilities they owed to foreign residents
These strong numbers are confirmation of a shift in sentiment toward US debt and currency. Judging by the chart above, net decreases in US holdings seem concentrated in two specific time frames. Since mid-2009, the trend has been decidedly positive after the late 08 through early 09 period which saw more mixed results. The predisposition toward net increases in holdings can be seen most readily on the official gross holdings chart below:
Private accounts have been more reliable net buyers of domestic debt, and thus the contrast to recent reports is far less pronounced in a chart of those monthly net changes below. In fact, the chart suggests "diminishing acceleration"
As far as which country is a net buyer and which is not, China is the perennial hot topic when it comes to foreign-held treasury debt. In recent months, doubts had been raised the largest holder of Treasury Debt might continue to incrementally decrease its holdings. But with today's release showing a $17.7 bln net increase, those fears are at least on hold, and possibly set to reverse if the trend continues in following months. That may depend largely on global perceptions of the EU sovereign debt crisis. Sure, things look great on this side of the pond now, but to whatever extent European panic is diminished, so too may be foreign holdings of US debt.
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