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US TIC Flows - Talking Points

  • The US recorded Total Net TIC Outflow of $8.1 billion and a Net Long-Term TIC outflow of $28.4 billion
  • Treasury holdings by the Chinese dropped for first time in four months by $10.4 billion
  • USD could face additional pressure going forward in light of the TIC data

The US Treasury released data on international holdings of US debt today which showed a Net Long-Term TIC outflow of $28.4 billion in March. The report compares to February’s numbers where inflows of $52 billion were recorded. Although the US Dollar had a muted reaction – likely overshadowed by auto tariff headlines – the TIC report could exacerbate downward pressure on the greenback. Also, disappointing US retail sales coupled with news of USMCA progress which sent USDCAD and USDMXN swooning weighed negatively on the US Dollar during Wednesday’s trading session.

DXY US DOLLAR PRICE CHART: 5-MINUTE TIME FRAME (MAY 15, 2019 INTRADAY)

DXY

China reduced their exposure to Treasuries by $10.4 billion, marking the first decline in US debt holdings since November. Speculation has stirred whether or not China is looking to dump Treasuries in retaliation of tariffs imposed by the Trump administration – commonly referred to as a “nuclear option” among market participants.

If the trend of China trimming its holdings of Treasuries continues, the retaliatory move could in theory put a drag on the US economy. Seeing less demand for debt could push yields and borrowing costs higher. Additional evidence of China dumping Treasuries in next month’s report expected on June 17 - could send a message to President Trump and the market that trade relations between the two countries remain tense and reaching a deal may less likely than currently expected.