Don’t Misread Treasury Outflows
Thursday’s release of Treasury International Capital (TIC) data, especially the details on foreign holdings of Treasurys, may prove to be another sore point for dollar bulls. The July release for May flows showed the largest net liquidation of US Treasury on record. Tapering by the Fed may offer higher yields, but existing holders may want to start limiting their losses as the marginal buyer in the Fed gradually steps back from the market. The risks to the Treasury market are clear, but we question whether this needs to translate into an outright dollar risk.
Read the full report: UBS