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Talking Points:

  • US Dollar unchanged after TIC flows reach an eleven month low
  • China holdings of US Treasuries drop to a 7-month low
  • TIC data suggests a caution over Fed intentions but may also indicate confidence in economy

The greenback offered little reaction as data from the Department of the Treasury showed a capital outflow from the United States in September. The headline TIC (Treasury International Capital) figure for September showed a net $175.1 Bln left the world’s largest economy. This is the outflow of capital since December. The biggest buyer of US debt, China, reduced its treasury securities holdings to a seven-month low by $12.5 Bln to $1.26 Tln. Japan similarly divested itself through the period. The second largest holder of US debt decreased its treasury holdings by $19.9 Bln to $1.18 Tln.

The selling of treasuries securities – particularly short-term – may indicate nations are preparing for a forthcoming Fed rate hike as soon as next month. The current implied probability that the FOMC will increase the base lending rate in December is 64 percent according to Fed Fund futures.

From Long-term TIC flows the data was more encouraging. The reading surpassed the revised prior print of $20.8 Bln with an influx of $33.6 Bln. In general an appetite for longer-dated sovereign debt, corporate debt and equities may show the positive view of the US and the appetite for its assets. The rise may indicate the markets have a bullish sentiment for the US economy overall.

Dollar Unmoved After China Treasury Holdings Hit a 7 Month Low