What is Treasury International Capital (TIC)?
Treasury International Capital (TIC) is a set of monthly and quarterly statistical reports measuring all flows of portfolio capital into and out of the U.S. and the resultant positions between U.S. and foreign residents. The data is used as an economic indicator and can help to predict the direction of the U.S. dollar (USD).
Understanding Treasury International Capital (TIC)
The Treasury International Capital (TIC) reporting system is the U.S. government's source of data on capital flows into and out of the United States, excluding direct investment, and the resulting levels of cross-border claims and liabilities. U.S. residents include U.S. branches of foreign banks, while foreign residents include offshore branches of U.S. banks.
The information is compiled and published by the U.S. Treasury, and is also used by the Bureau of Economic Analysis as an input into the U.S. Balance of Payments data. Data is collected from a number of institutions in the U.S., including banks and other depository institutions, as well as securities brokers and dealers. Data on securities transactions is recorded monthly, and cross-border positions and derivatives contracts are recorded quarterly.
- Treasury International Capital (TIC) data measures flows of portfolio capital into and out of the U.S., and the resultant positions between U.S. and foreign residents.
- The data is compiled and published by the U.S. Treasury, and is also used by the Bureau of Economic Analysis as an input into the U.S. Balance of Payments data.
- Treasury International Capital (TIC) reports can function as economic indicators, helping to predict the direction of the U.S. dollar and interest rates.
Recording Treasury International Capital (TIC)
The Treasury International Capital (TIC) report is broken down as follows:
- Gross Purchases of Domestic U.S. Securities: The total number of U.S. securities purchased by overseas investors.
- Gross Sales of Domestic U.S. Securities: The total number of U.S. securities sold by overseas investors.
- Domestic Securities Purchased, net: The total outflow or inflow of capital from purchases or sales of U.S. securities by overseas investors. This is calculated by subtracting gross sales from gross purchases.
- Private, net /2: Private purchases of Treasury bonds (T-Bond) and notes, government agency bonds, U.S. corporate bonds and equities traded on stock exchanges.
- Official, net /3: Purchases of Treasury bonds and notes, government agency bonds, U.S. corporate bonds and equities traded on stock exchanges from foreign public institutions, governments, and central banks.
- Gross Purchases of Foreign Securities from U.S. Residents: The total amount of capital that enters the U.S. as a result of U.S. residents selling foreign securities to overseas entities.
- Gross Sales of Foreign Securities to U.S. Residents: The total number of foreign securities purchased by U.S. residents.
- Foreign Securities Purchased, net: Calculated by subtracting item 7 from item 6, this line provides the total inflow or outflow based on domestic purchases or sales of foreign securities.
- Net Long-term Securities Transactions: Total gross purchases of long-term U.S. securities by foreign investors, minus gross sales of long-term securities by overseas investors to U.S. residents.
- Other Acquisitions of Long-term Securities: A net figure of all other kinds of long-term transactions not referred to in the above category.
- Net Foreign Acquisition of Long-term Securities: Calculated by adding item 10 to item 9, here the treasury provides a complete round-up of all long-term U.S. securities acquired by overseas investors.
- Increase in Foreign Holdings of Dollar-denominated Short-term U.S. Securities and Other Custody Liabilities: All short-term U.S. Treasury securities, bank and broker liabilities sold to foreign entities.
- Change in Banks’ Own Net Dollar-denominated Liabilities: Measures USD liabilities reported by banks.
- Monthly Net TIC Flows: A total measure of long- and short-term capital flows in and out of the U.S. on a net basis.
Example of Treasury International Capital (TIC)
The Treasury reported an $8.1 billion net foreign outflow of U.S. securities in March 2019, representing a slowdown on the $21.5 billion recorded in the prior month. Private overseas investors made net purchases totaling $13.6 billion, yet this was offset by foreign central banks and other government entities selling $21.7 billion.
Rumors that China planned to offload some of its stockpile of U.S. government bonds in retaliation to President Donald Trump’s trade tariffs proved correct. However, the value of U.S. Treasuries held by overseas investors still rose in March 2019 on a net basis, showing that the safe haven asset remains in high demand.
Advantages and Disadvantages of Treasury International Capital (TIC)
Treasury International Capital (TIC) data summarizes the effects of net foreign portfolio investment flows into the U.S. and, as a result, is closely monitored by traders. Studying it can help explain past movements in the U.S. dollar (the data is released with about a 6-week lag) and provide information to use in forecasting the future direction of the greenback.
Similarly, the data can reveal what type of U.S. securities are popular, and the likelihood of potential interest rate hikes — if the U.S. deficit is not financed by regular inflows, borrowing costs will likely rise, weighing on economic growth. However, the data is by no means perfect. The Treasury itself has admitted that it is impossible to accurately account for all overseas holdings of U.S. securities.