Treasury International Capital (TIC): What it Means, How it Works

What Is Treasury International Capital (TIC)?

Treasury International Capital (TIC) is a set of monthly and quarterly statistical reports measuring flows of portfolio capital into and out of the U.S. and positions between U.S. and foreign residents. The data is used as an economic indicator and can help predict the direction of the U.S. dollar (USD).

Key Takeaways

• Treasury International Capital (TIC) data measures flows of portfolio capital into and out of the U.S. and positions between U.S. and foreign residents.
• The data is compiled and published by the U.S. Treasury and 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 predict the direction of the U.S. dollar and interest rates.

Understanding Treasury International Capital

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 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 used by the Bureau of Economic Analysis as an input into the U.S. Balance of Payments data.

Data is collected from various institutions in the U.S., such as banks and other depository institutions, securities brokers, and dealers. Securities transactions data is recorded monthly, and cross-border positions and derivatives contracts are recorded quarterly.

Recording Treasury International Capital

The Treasury International Capital (TIC) report is broken down as follows:

1. Gross purchases of domestic U.S. securities: The total number of U.S. securities purchased by overseas investors.
2. Gross sales of domestic U.S. securities: The total number of U.S. securities sold by overseas investors.
3. Domestic Securities Purchased, net: The total outflow or inflow of capital from purchases or sales of U.S. securities by overseas investors. Calculated by subtracting gross sales from gross purchases.
4. 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.
5. 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.
6. 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.
7. Gross sales of foreign securities to U.S. residents: The total number of foreign securities purchased by U.S. residents.
8. 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.
9. 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.
10. Other acquisitions of long-term securities: A net figure of all other kinds of long-term transactions not referred to in the above category.
11. 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.
12. 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.
13. Changes in banks’ own net dollar-denominated liabilities: Measures USD liabilities reported by banks.
14. 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

The Treasury reported a $146.4 billion net foreign inflow of U.S. securities in March 2021, nearly double the $73.7 billion in inflows recorded in the previous month. Private overseas investors made net purchases totaling $140 billion during the same period, adding to the $6.5 billion purchased by foreign central banks and other government entities.

Source: U.S. Treasury.

Source: U.S. Treasury.

Advantages and Disadvantages of Treasury International Capital

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 the popularity of U.S. securities 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 not perfect. The Treasury has admitted the challenge of accurately accounting for all overseas holdings of U.S. securities.