Policy Hub: Macroblog provides concise commentary and analysis on economic topics including monetary policy, macroeconomic developments, inflation, labor economics, and financial issues for a broad audience.
Comments are moderated and will not appear until the moderator has approved them.
Please submit appropriate comments. Inappropriate comments include content that is abusive, harassing, or threatening; obscene, vulgar, or profane; an attack of a personal nature; or overtly political.
In addition, no off-topic remarks or spam is permitted.
US Assets: Still Looking Tasty
It appears that the appetite for dollar-denominated assets is not sated quite yet. From Bloomberg:
International buying of U.S. financial assets unexpectedly climbed to a record in May as investors snapped up American stocks and corporate bonds.
Total holdings of equities, notes and bonds climbed a net $126.1 billion, from $80.3 billion the previous month, the Treasury said today in Washington...
Brad Setser does his usual fine job with the details:
Demand for US equities and corporate bonds was particularly strong, which does suggest the persistence of private demand for US assets abroad. Private investors tend to buy corporate bonds and equities; central banks tend to buy Treasuries and Agencies -- though that is changing.
What causes me trouble is the split between private and official purchases, and specifically the absence of any official inflows in the May TIC data.
In case you need visual confirmation:
Brad isn't buying it:
I have a hard time believing that. May was a record month for official reserve growth. China, Russia and Brazil all added to their reserves like crazy. Those three together combined to add close to $100b to their reserves – and a host of other countries were adding to their reserves too. That money has to go somewhere...
... the Fed’s custodial data doesn’t show a comparable fall off in official demand in May (June is another story).
The Treasury helpfully explains why the custodial data may differ from its own data:
- Differences in coverage: The most important reason for differences between holdings reported in the TIC and the FRBNY custody accounts is a difference in coverage. First, not all foreign official holdings of Treasury securities as reported by the TIC system are held at FRBNY. In particular, Treasury securities held by private custodians on the behalf of foreign official institutions are included in the TIC but not in the FRBNY figures. In this sense, the coverage of the TIC system is broader than that of the FRBNY custody holdings. Second, the custody holdings at FRBNY include securities held for some international organizations as well as for foreign official institutions. In this sense, the coverage of the FRBNY custody holdings is broader than the foreign official designation in the TIC system.
That description suggests advantage Treasury to me, but Brad offers other reasons for distrusting the official (that is, government) flows reported in the TIC data, and sticks to his guns on the belief that central bank diversification continues on. I won't -- can't really -- argue. But at the very least the latest report does little to vanquish the sense that global asset demand retains a strong attraction to the USA.
- Business Cycles
- Business Inflation Expectations
- Capital and Investment
- Capital Markets
- Data Releases
- Economic conditions
- Economic Growth and Development
- Exchange Rates and the Dollar
- Fed Funds Futures
- Federal Debt and Deficits
- Federal Reserve and Monetary Policy
- Financial System
- Fiscal Policy
- Health Care
- Inflation Expectations
- Interest Rates
- Labor Markets
- Latin AmericaSouth America
- Monetary Policy
- Money Markets
- Real Estate
- Saving Capital and Investment
- Small Business
- Social Security
- This That and the Other
- Trade Deficit
- Wage Growth