Foreign Demand for Treasuries Still Strong. Concerns Growing Though…

Mixed news hit the markets half an hour before all three indexes opened down by more than 2% on Monday. The TIC flows report, which tracks the volume of investments flowing in and out of the country, showed a large inflow of capital in June, as appetite for Treasuries remained healthy, but total net flows showed a worse than expected outflow. 

The Good News: the Treasury International Capital report showed showed a huge net inflow of financial assets as the second quarter concluded, with $90.7 billion of financial assets entering the US in June, after sales of $19.4 billion in May.

Chinese holdings of Treasuries moved lower by $25 billion, which may be worrying if that becomes a trend, but other foreign demand advanced in the month, including in Japan, who expanded their holdings by $34 billion. In equities, the net gain was $19.1 billion, displaying that optimism for a US rebound isn’t just local.

The Bad News: monthly net TIC flows, a more comprehensive measure that includes non-market flows, short-term securities, and changes in banks' dollar holdings, reported  a net foreign capital outflow of $31.2 billion in the month â€