The Treasury International Capital (TIC) data showed that recent volatility in portfolio capital inflows died down in February. The United States is having few problems financing its current account deficit at present.
Long-Term Holdings Little Changed
- After some volatility in recent months, net inflows of long-term portfolio capital totaled $9.8 billion in February.
- Private purchases of U.S. long-term securities were well balanced in February. Foreign private investors added modestly to their holdings of U.S. Treasury securities, agency securities and corporate bonds. Foreign holdings of U.S. equities remained constant on balance during the month.
Financing Current Account Deficit Is Not Problematic
- Foreign holdings of short-term assets (i.e. assets with maturities of less than 12 months) were also little changed. Total portfolio inflows totaled only $4.1 billion in February.
- Through the monthly volatility, the United States is having little difficulty financing its modest current account deficit. If U.S. interest rates rise later this year, the U.S. dollar should strengthen further versus most currencies.
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