Interest Rate Roundup

Friday, June 15, 2007

TIC shows a big bump in foreign flows ... while production and capacity utilization comes in light

You gotta love these big data days. They sure keep you on your toes. The latest two reports show:

-- Total net fund flows surged to $111.8 billion in April from a revised $30.1 billion a month earlier. That was well above the $55 billion estimate. If you exclude short-term securities and certain other trades, holdings were up to $84.1 billion from $51.2 billion. Foreign buyers piled into stocks and agency bonds (i.e. bonds sold by Freddie Mac and Fannie Mae), but bought the fewest Treasury securities in a few years.

By country, Treasury purchases declined a sharp $5.8 billion in China and $12.4 billion in the U.K., but rose by $3.2 billion in Japan.

-- Industrial production was unchanged in May, down from a 0.4% gain in April. Manufacturing activity was up 0.1%, while utility output was down 1.3% and mining was up 0.5%. Capacity utilization dipped to 81.3% from 81.5% in April. Both figures fell below expectations.

Bond market impact? Almost nil vs. where bonds were trading before this latest batch of data. Today's close should be interesting, to say the least.

Incidentally, the New York Times has a good story today about the potential impact of higher interest rates on different parts of the economy, including corporate and consumer borrowers. You can read it here.


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