TIC Data Shows Foreign Governments Record Buyers of U.S. Treasuries in January

January TIC data showed foreign governments buying a record amount of U.S. Treasury debt in January. Total purchases of all U.S. financial assets by foreign governments rose to a record $53.4B in January. This helped offset the declining demand for stocks, and enabled total and long-term flows into the US to remain positive at the start of this year. Total holdings of U.S. debt and equities by foreigners rose $62B in January (consensus $60B, prior $56.5B). Holdings with maturities of over a year, a good indication of true investor interest, rose $37.4B (consensus $60B), a notable decline from December's revised higher pace of $72.7B. The investment flows are indicative of continued flight to safety out of stocks and into government backed debt, and concurs with the steady drop in Treasury rates we've seen over the past few months. The Fed cut interest rates twice in January. Equity markets had also been falling for three straight months, after hitting a peak in October, by January. The TIC flows cover U.S. government, agency, and corporate debt, agency mortgages, and stocks. Demand for Treasuries rebounded strongly in January, as ten year interest rates fell over 40bps, thanks to foreign official government demand. Net Treasury positions rose by +$37.6B versus net buys of only $1.4B the prior month. Though the S&P 500 fell -6.1% in January, foreigners continued to buy, snatching up $17.4B, a decrease from the $33.5B pace in December. Agency holdings rebounded in January (+$19.3B), after declining in December (-$3.3B). U.S. investors also increased their demand for foreign assets in January, buying a net $19.2 compared to $12.6B in December. Corporate bond demand plummeted down to $6.9B from $37.5B the prior month. Private investors slowed their demand for U.S. long-term assets from $33.3B in December to $27.8B in January. This was more than offset by a rise in official purchases (central banks) of $53.4B from $35.8B in December. China (+$15B), Japan (+$5.7B), Brazil (+$11.8B), the UK (+$2.6B), and major oil exporters (+2.8B), all increased their holdings of U.S. Treasuries. Caribbean banks, which are heavily allied with hedge funds, were net sellers of $8.3B of Treasuries.