TIC Long Term Purchases (Feb) Actual 22.0B, Expected 17.0B, Previous -36.8B (Revised from -43.0B)
Release Explanation: The Treasury Investment Capital (TIC) report is a measure of foreign investment flowing into the US Equity, Treasury, and Bond Markets, minus the amount of US investment heading abroad. It is important since a certain amount of foreign investment is currently needed in the US to fund our “twin deficits” the Trade and Current Account Balances. Trade and Current Account Balances: the size of the US Public debt and Imports exceeding Exports means the US needs foreign investment to fund the shortfalls. A miss on the TIC Data moves the Markets one way or the other because Institutions have to realign existing positions in response to the next Quarter and half Year targets.
”Money that flows into or out of US Markets will always impact the US Dollar, an increase in overseas investments can only be funded in US Dollars so a local Currency is being sold, US Dollars are bought, and then those US Dollars are transferred into Treasuries. By the time this report is released, this process of swapping Currencies has already happened and may not have an instant impact on the US Dollar. It does however give a good idea of the US Dollar sentiment.” TheLFB-Forex.com Trade Team members said.
Trade Desk Thoughts: Demand for U.S. financial assets rose in February from the previous month. Net sales of stocks, notes and bonds were $22 billion, after falling by $36.8 billion (revised) in January, the Treasury Department said today.
Foreign demand for U.S. agency debt (Fannie Mae and Freddie Mac) rose for the first time in the last four months, rising a little over a $1billion. Net foreign purchase of U.S. equities was -$5.2 billion in February.
Net foreign purchases of long-term U.S. securities were $20.8 billion. Of this, net purchases by private foreign investors were $25.9 billion, and net purchases by foreign official institutions were negative $5.1 billion.
“Over the last few months, the TIC data has shown a very volatile pattern. November and December were the first two months in more than a year when the TIC data recorded a net-out flow of U.S. securities. Additionally, February data shows that foreign official institutions reduced their U.S. assets, something that might have a negative effect on the dollar’s strength,” TheLFB-Forex.com Trade Team members noted.
Forex Technical Reaction: The release passed unnoticed in both the currency and in the equity markets. Since the day started, the dollar strengthened against the euro and the yen, but declined against the pound.