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Preview - TIC Flows May Not Get Expected Bounce
While receiving little attention, Treasury International Capital (TIC) flows have plummeted in recent months, signifying a massive outflow of dollar-denominated assets. In fact, its last two releases set new records for the indicator. For July (released in September, as the indicator has a 2-month lag), TIC flows dropped 80% to just over 19 billion. This was its all-time largest drop until last month's release for August's data. Apparently, heightened credit market fears made things even worse as TIC flows fell to -69.3 billion. Not only was this the largest monthly decline, but it was also the largest outflow in a single month. This came as a shock to some. A Bloomberg article posted before the last release had the following comment from a London-based economist: "We're definitely looking for a rebound...August was about safe-haven flows." Or maybe not. The economist wasn't alone in his views, though. The consensus forecast for August's data was a positive 60 billion. Among other things, analysts noted increasing US debt purchases by OPEC. However, this obviously wasn't enough to offset the flight from the Dollar. For the September data release tomorrow, economists expect a strong bounce once again. The consensus forecast is for a positive $72 billion. As several Barclays Capital analysts noted, the panic-initiated flight from the Dollar may have subsided in September, as markets recovered and sentiment improved. On the other hand, large moves out of dollar-based assets could be the start of a longer-term trend, not just a two-month anomaly. Another big "surprise" number should be USD bearish. Last month's huge surprise hurt the Dollar, but it's impact was limited. The EURUSD moved up about 20 pips in response to the news.