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Foreign Buyers Pile Into Treasuries Ahead of FOMC

Foreign Buyers Pile Into Treasuries Ahead of FOMC

Gregory Marks,

THE TAKEAWAY: Net Long-term TIC Flows blew past estimates of -$15.0B to come in at $31.1B -> Total Net TIC Flows increased to $56.7B from -$19.7B prior -> USD Higher

Foreign investors piled into Treasuries during the month of July with the net Long-term TIC Flows posting a positive print for the first time since January. Tomorrow will contain major event risks with global markets almost sure that the Federal Reserve will reduce asset purchases to some degree. Although some say the ‘taper’ is priced in, FX markets are almost at a standstill as traders await the official announcement.

Net Long-term TIC Flow measures the difference between gross Treasury purchases by foreign buyers from domestic persons and gross Treasury sales by foreigners to domestic residents. Essentially, a negative number would mean that there are fewer purchases by foreigners from US residents than there are sales of foreign owned Treasuries to U.S. residents.

Dow Jones FXCM Dollar Index (Ticker: USDOLLAR) (5-Minute Chart)

Foreign_Buyers_Pile_Into_Treasuries_Ahead_of_FOMC_body_Picture_2.png, Foreign Buyers Pile Into Treasuries Ahead of FOMC

Source: FXCM Marketscope

The greenback gained following the reading as traders saw market participants around the world stood confident to buy Treasuries ahead of a possible taper. Although non-US traders sold off Treasuries from January, the July print showed that foreign buyers came back and in large numbers. Prior to the negative trend staring in February, the print had been positive since 2009.

Foreign_Buyers_Pile_Into_Treasuries_Ahead_of_FOMC_body_Picture_1.png, Foreign Buyers Pile Into Treasuries Ahead of FOMC

Gregory Marks, DailyFX Research Team

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