The U.S. Department of the Treasury today released Treasury International Capital (TIC) data for May 2011. TIC data shows the difference in value between foreign long-term securities purchased by US citizens and US long-term securities purchased by foreigners during the reported period.
The data indicates that for the first time in eleven months, foreigners were net sellers of U.S. assets in May. The main driver for turning foreign investors away from US Treasuries was low interest rates and speculation that they will remain low for quite a while. Consequently, investors searched elsewhere for higher returns.
Additionally, growing concerns over the U.S. fiscal deficit and nearing the debt ceiling already began by May.
Data showed that short term treasuries were sold the most, such as T bills and deposits, contributing to an overall net outflow of $67.5 billion.
Foreigners also cut purchases of long-term U.S. securities in May to $23.6 billion from a previous $30.6 billion, which was much lower than the expected $48.4 billion in purchases.
Following the release of the data at 12:30 GMT, the Dollar weakened against the Euro, with EURUSD moving up to 1.4094 from the pre-news level of 1.4052.
“This is not good for the dollar, and it seems clear to me that the Federal Reserve’s strategy of ultra-accommodative monetary policy is prompting investors to shift their savings out of the U.S.,” said BNY Mellon strategist Michael Woolfolk.