Tuesday, August 20, 2013

US International Capital Flows (excerpt)

The US Treasury released data last Thursday tracking international capital flows for the US through June. The outflows out of US securities was shocking. Especially troubling was the amount of US Treasuries sold by foreigners. Their outflows exceeded those from US bond funds. Of course, some of the outflows from the bond funds could be attributable to foreign investors. Nevertheless, the data suggest that foreign investors may have been more spooked by the Fed’s tapering talk in May and June than domestic investors.

As the US federal deficits have swelled, the US government has become more dependent on the kindness of strangers. Apparently, they are losing their interest in helping us out with our debts. Consider the following TIC data:

(1) Total securities. During June, foreigners sold $934.1 billion (annualized) in US Treasury bills, notes, and bonds; Agency bonds; corporate bonds; and US equities (Fig. 1). Over the past three months, the annualized net capital outflows from these securities was $462.8 billion (Fig. 2).

(2) Treasury notes & bonds. During June, the net outflows from US Treasury notes and bonds was $489.2 billion (annualized). The annualized rate out of these securities over the past three months was $271.1 billion.

(3) US equities. Over the past three months through June, foreigners have also been net sellers of US equities totaling $97.1 billion at an annual rate.

(4) Agency & corporate bonds. Foreigners haven’t been selling US Agency and corporate bonds, but they haven’t been buying them either.

Today's Morning Briefing: Kindness of Strangers. (1) Summer tour in America. (2) Dodging flash floods. (3) Tapering talk and the dissent debate. (4) Fed’s exit strategy getting messier. (5) Tapering taper. (6) Foreigners are tapering their holdings of US bonds. (7) Industries with lots of part-timers account for much of this year’s job gains. (8) Earnings season’s winners and losers. (More for subscribers.)

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