TIC Data Shows Chinese Appetite for US Assets Rose Before Tariffs

Talking Points:

  • Chinese holdings of US treasuries increased in February by the most in six months
  • Japanese holdings of US treasuries declined, falling to $1.06 Trillion
  • The overall drop in TIC flows creates some downward pressure for the Dollar

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Appetite for US assets was mixed before the headlines ushered in ‘trade wars’ talk in March according to recent data. The Treasury International Capital (TIC) statement summarizes the flow of stocks, bonds, and money market funds to and from the United States. This most recent report relayed February data, with a net inflow of $44.7 billion. Of this, net foreign private inflows were $26.9 billion and net foreign official inflows were $17.8 billion. The two largest foreign holders of US treasuries, China and Japan, both saw large changes in their holdings for the month before trade war talk had really intensified.

Chinese holdings of US treasuries rose by the most in sixth months in February, up $8.5 billion to $1.18 trillion in total. As the largest foreign holder of US treasuries, Chinese holding figures are an important gauge of foreign demand. Similarly, Japan saw their holdings of US treasuries drop by $6.3 billion to $1.06 trillion. The miss on expectations may spark a bearish tone for the Dollar but the increased holdings by the People’s Bank of China may soften concerns modestly. With trade disputes progressing, there has been much talk of China using US treasuries as leverage. The data for February reveals China had an appetite for US treasuries before potential tariffs were fully aired, leaving next month’s figure a key indicator for the direction the key trade partner wishes to take.

As the market digests the TIC statement and other events on the economic calendar, along with the ever-looming and uncertain threat of trade wars, the Dollar index has moved lower towards two-week lows. As the week moves on, there is no lack of market moving data due. China’s GDP figures are due Tuesday morning, a global metric that is especially tuned into the standoff between the super powers as they gauge growth at the others’ expense.

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