Interest Rate Roundup

Tuesday, October 17, 2006

Foreign buying bonanza

Every month, the Treasury Department releases statistics on net foreign buying/selling of U.S. assets. This "TIC" data is oudated (you get it two months in arrears) so it's not really "tradable." But it does give you an idea about how much demand there is for U.S. Treasuries, stocks, agency bonds (Fannie Mae/Freddie Mac), and corporate debt. The latest numbers were mind-bogglingly high -- a record $116.8 billion in August. That was a huge jump from $32.9 billion in July, and more than double the average forecast.

Basically, foreigners are still showing a healthy appetite for our assets. It seems that optimism the Fed was done hiking rates, and a belief the economy and inflation would slow, prompted buyers to step up to the plate in spades. But the question now becomes, what next? Bonds have gotten hit pretty hard in the past couple weeks amid signs we're not exactly seeing economic Armageddon. Will tons of foreign money continue to flow into U.S. debt if oil prices start rising again (they are) and if the economy re-accelerates (which it might be in the process of doing)?


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