US Treasury Releases International Capital Flows Data for May 2014

This data, which is released once a month from the US Treasury Department, gives a fairly good sense of the appetite for Dollar denominated assets among Foreign investors and Foreign Central Banks.

It is dated however and one must remember that. Today's data is for the month of May so you can see it is not especially timely. However, it still has value in my opinion.

I am still eagerly waiting for the June data during which Treasury usually makes the adjustment from the country in which the Treasury transaction was completed to the country of origin.

In looking over the Major Foreign Holders of Treasuries data ( broken down by country), a couple of things stand out. First, China and Japan, the two largest holders of our debt, both INCREASED their holdings during the month of May.

China bought $7.7 billion worth while Japan bought $10.4 billion. Chinese holdings are down $26.4 billion from the same month last year. Japanese holdings on the other hand are up a staggering $116.4 billion from May 2013.

Belgium, the center of the so-called "conspiracy" ( among the gold perma bulls ) for surreptitious buying of US Treasuries unloaded $4 billion of the things. I guess someone forgot to tell them this month that they are supposed to be buying the Treasuries that the US Federal Reserve has stopped buying for its QE program. Remember, the theory is that the tapering has not actually stopped even though the Fed has announced that it has begun tapering and is slowing its purchases of US Treasuries. You see, the Treasury buying is really still going on. It is just being done through back channels using Belgium as the epicenter.

Sigh! It never does end does it with some of those folks.

Overall, there was a pretty healthy increase among all of the buyers for May. They increased their holdings of Treasuries to $5.976 trillion, up from $5.960 trillion in April. That is a $15.1 billion increase.

Compared to the same period last year ( May 2013), Treasury holdings are up $318 billion ( $5.976 to $5.658).  So much for the demise of the US Dollar.

Keep in mind that this particular data set is the "Holdings" data.

As far as the NET PURCHASES DATA goes, Total NET Foreign Purchases for May increased by $25 billion. That is a big improvement from the previous month ( April) when the number was a negative $13.589 billion. A negative number means foreign investors, official institutions, etc. were selling ( there was a net OUTFLOW of capital instead of a NET INFLOW).

NET PURCHASES of US equities showed another increase for May ( $10.78 billion). That comes on the heels of a net increase for April of nearly the same amount ( $10.19 billion). Foreign appetite for US stocks remains strong.

NET PURCHASES of US government agency debt jumped to $4.169 billion after falling the previous month by $2.082 billion.

The loser this month, among foreign investors, was US corporate debt. There were NET OUTFLOWS of $5.385 billion for May. That follows net outflows of $8.509 billion in April. This category is especially volatile however.

All in all, demand for US dollar denominated assets among foreign investors/institutions/official sector was strong in May.

One last thing for this set of comments - gold is moving higher today on news that the US has introduced a new set of sanctions against Russia over the Ukraine situation. Russia is not happy about it. Also, the escalation in tensions and the conflict over in Israel and the Gaza region with Hamas has fueled nervousness in stock markets and is bringing selling into equities, buying into bonds, and buying into gold. Gold is being driven of late by headlines.

It looks as if it might want to run up into the former resistance zone ( $1330- $1340). Geopolitical tensions have put a "13" handle in front of it and is offering psychological support.

You can look at the ADX and see the muddled mess on the chart. There is no clearly defined trend at the moment.

As I have been writing this, news has come out that a passenger plane has been downed over the Ukraine. That is really fueling the safe haven bids...We'll have to get the details on this as they come out.