The TIC data for May was inconsistent. It has been that way for several months, and importantly describes what I think is the operative “dollar” condition. Though the data is several months old already, we can tell by certain real-time prices and indications that the difference between 2016 and 2017 is very clear in some parts, and none in others.
The headline data, for TIC anyway, is a perfect example. The monthly net transactions are broken into two broad categories: private foreign net purchases of US dollar assets, and those conducted by foreign official institutions (largely central banks).
Despite a few months ago the media running stories about foreign UST holders getting anxious about a Trump administration, in June no such apprehension was anywhere to be found. Private investors bought the most (net) UST’s since June 2015. Combined with a heavy net positive for corporate bonds, foreign holders added the most US$ assets two months ago going all the way back to August 2010!
While that may suggest renewed vigor for US stuff, the official side sold, on net, the most US$ assets since January. While that isn’t a long ago comparison that gets attention, official sector selling in January was far too much like the past few years. That indicates a high degree of intervention in favor of foreign “dollars” which wouldn’t be necessary under even close to normal conditions.
The latter’s (official) net sales are surely being done so that the former’s (private) purchases can be. This doesn’t mean that foreign central banks are trying to aid the US Treasury in the demand for federal paper, rather that in steadying foreign “dollar” markets as best as might be possible overseas officials are hoping that will allow regular commerce and flow to resume on their shores. Foreign net purchases of UST and other US$ assets would be consistent with that process.
But there is a catch, and a big one. For the “rising dollar” these official activities (along with others that won’t ever show up in statistics and accounting statements) were often easily overwhelmed by global banking flight. I highly doubt that in May 2017 they suddenly became more effective to the degree we see in “output” on the private side.
