US TIC Data for January is released. 3rd decline in the last 4 months
The US TIC data for January was just released. It showed that foreigners holdings of US assets fell by 43 billion. This is the 3rd decline in the last 4 months.
The expectation was for a gain of 45.0 billion. This suggests that foreigners have shunned investment into the US. With a large trade deficit and a large government deficit which requires foreign investor support, this is not a great sign for US assets (in particular bond yields). This may have caused the back up in treasury yields in January. As the chart indicates below the 30 year bond yield rose dramatically in January.
The problem with this release is the data tells what happened in the past. As the chart above indicates the yield on treasuries rose sharply in January and the data today suggests the lack of support from foreigners probably contributed to that gain. However, now that yields are higher, will foreigners return? Or is the fiscal stimulus which will ballloon the deficit keep foreigners wary of the US situation and demand higher yields?
With 3 of the last 4 months showing a decline, it suggests that there is a trend developing that suggests a unwillingness to invest in the US. The last time this occurred was in 1995. This should be bearish for the dollar in the longer term should the trend continue. It may also lead to higher rates in the US than what otherwise would exist.
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