[13:57 US GOVTS: Fallout From Credit Crisis Seen in TIC Data]
Boston, May 15. Though foreigners continued to buy treasuries (a record $55 bln) and agency ($18 bln) paper hand over fist in the latest March TIC data the net flow for the month was actually a negative $48 bln. While far from an expert in these numbers it appears that the shortfall was made in the private flow category and specifically bank liabilities which fell $115 bln.
The thinking is that the latter number ($115 bln) represents a falloff in US bank lending to their European counterparts over the heighten counterpart concern engendered by the subprime/credit crisis. If so, this may be yet another reason why the Fed is contemplating expanded both the size and term maturity of the TAF program.
Either way, the data is causing quite a stir on the Street and is seeing a knee-jerk buying and curve steepening reaction in the treasury market as traders try to sort out what it all means.