Trader Dan Comments On November’s TIC Data

Posted at 11:39 PM (CST) by & filed under Trader Dan Norcini.

Dear Friends,

The Treasury International Capital Flows data covering November 2009 (remember it is about two months behind the current month) reveals a huge surge in capital flows predominantly as a result of a massive buying binge in US Treasuries. I keep data going back to 2005 and November’s Treasury buying was the largest for any month through this entire time frame. As a matter of fact, prior to November’s huge number, the previous high in Treasury purchases occurred during the month of June 2009 when $100 billion worth of them were purchased on net. November topped that by another $18 billion.

Strangely enough, when you look into the breakdown of the Treasury buying by country, we see a decrease in the biggest buyer of US Treasuries, namely China. They sold about $9 billion worth. Japan compensated for that by buying another $11.4 billion. The biggest increase however came out of Great Britain where some $47 billion were added. Keep in mind that London is often the primary conduit through which foreign entities affect purchases of US Treasuries for the purpose of secrecy as that information generally does not get revealed until the Treasury revises the TIC data in June of each year. Call me cynical but we really have no idea who actually bought all those Treasuries through London offices. In times past the revisions have seen many of those purchases being credited to China but that does not guarantee anything of the sort this time around, especially with China being a net seller this month. WE also have a decent sized increase in Treasury buying out of those Caribbean based banks.

Were it not for the binge in Treasury buying, the Agency, Corporate Debt and Equity categories would not have been sufficient to fund the negative balance of trade.

This of course will be spun as a vote of confidence for the US Dollar as the spinmeisters will step up and proclaim that the world still has a strong appetite for US debt. Personally I think the Fed is buying the Treasuries.

Look closely at the rate of change of buying chart and you will see the steep drop off in the RATE OF CHINESE TREASURY purchases.

Click here to view today’s TIC data charts in PDF format with commentary from Trader Dan Norcini…