Trade Desk Thoughts - TIC Long Term Purchases

TIC Long Term Purchases (Aug) Actual $14.0B, Expected $28.0B, Previous $8.6B (Revised from $6.1B)

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.

Trade Desk Thoughts: Net foreign purchases of long-term securities were $14.0B in August, an increase of $5.4B from July. Net foreign purchases of long-term U.S. securities were negative $8.8B. Of this, net purchases by private foreign investors were $1.5B, and net purchases by foreign official institutions were negative $10.2B. U.S. residents sold a net $22.7B of long-term foreign securities. Foreign holdings of dollar-denominated short-term U.S. securities, including Treasury bills, and other custody liabilities increased $7.6B. Foreign holdings of Treasury bills increased $20.6B.

Forex Technical Reaction: S&P futures rose to a 2.5% gain after the CPI and unemployment figures were released, but have recently pulled back to a 1.4% gain for the session. USD/JPY gave back some of its gains while EUR/USD and GBP/USD declined

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