A TIC Look At Qualitative Contraction
The latest update of the Treasury Department’s Treasury International Capital (TIC) estimates clarified a few things. To begin with, for the month of September the Chinese sold UST’s again for the first time in seven months. Between the end of January and the end of August, the Chinese had added $149.4 billion in UST holdings. In September, however, the balance was reduced by $19.7 billion.
The change back to selling them wasn’t a surprise. CNY stopped rising early on in September, clearly reversing as did the Hong Kong dollar at the same time. We can add Belgium’s holdings to China’s and the net was still a negative coincident to the shifts in currency exchange.
The other matter for TIC to clear up is the ongoing breakdown or change in the quarterly pattern of dollar bank liabilities to and from overseas. For the month of August, the Treasury Department figured an unusually large increase in them far out of line with middle month behavior in recent years.
There really wasn’t anything else suggesting rapid growth in the cross-border dollar business, so it seemed either an outlier or part of the shifting pattern of intra-quarter activities within the eurodollar banking sector. The update for September shows that it was indeed the latter.
Bank liabilities declined by a net $118 billion in September, offsetting August’s jump, leaving the quarterly total nearly flat. That’s much more consistent with global dollar banking since the “rising dollar” began. And it’s also corroborated by market prices such as swap spreads.
It isn’t at all clear why the quarterly pattern has shifted for banks, nor is it clear that it is actually banks doing something different. It may be a difference in crunching the statistics or even in data collection.