(May 31st 2012) Every month, the US Treasury Department Releases the “TIC Report.” In the broadest sense, the report covers the purchases and sales of US stocks and bonds by foreigners and the governments of foreign countries.
The treasury market tends to react fairly strongly to this report. In particular, the market focuses on the sales of US Treasury bonds to foreign governments with particular attention being paid to China. The concern is that China is going to sell its over $1 trillion of US Treasuries or at very least stop buying them at an aggressive pace. (Read our article Could China Destroy the Market for US Treasuries?)
The market’s reaction to most current release was muted. The 10 year Treasury yield on May 15th (the date of the release) rose 0.01% to 1.77%.
Key Takeaways from the TIC Report:
Private investors and governments are almost taking opposite actions when it comes to Treasuries. Individuals sold Treasuries, albeit in smaller quantities, while governments lapped up Treasuries in large quantities, driving yields down.
Foreign governments seem to be moving to the safety of US Treasuries (“Flight to Safety”) from the slightly higher yielding but risky Government Agency Bonds.
Americans are bringing money back to the US, reversing the trend of the last 12 months..