The major averages recover their early losses on generally disappointing economic data to enter the final hour about even.
Housing starts fell 5.3% in September to 1.201 million units annualized, missing expectations on a large drop in multi-family construction. Permits also missed expectations falling .6% to 1.241 million units annualized, a second consecutive decline and the 5th decline in the last 6-months. While nothing to be alarmed about yet, real estate related data continues to soften following a trend began in the early summer.
Yesterday’s TIC or Treasury International Capital flows report showed significant foreign purchases of securities with a 131.8 billion Dollar gain in August. This represents the largest net foreign purchase total since September of 2014. Equites sold off for a 4th consecutive month. Bonds and particularly Treasuries were very popular.
With all the hand wringing over our bloated budget deficits, reduction in the Fed’s gargantuan balance sheet, aka quantitative tightening, and the trade wars with respect to who is going to buy all of Uncle Sam’s best paper. The first 11 days of the 2019 fiscal year has seen 138 billion in new debt, a 4.6 trillion Dollar annualized rate. Our two largest creditors China, 1.165 trillion and Japan 1.03 trillion, have steadily whittled down their holdings over the last few years. The next ten foreign holders include Brazil, Ireland, The City of London, Switzerland, Luxemburg, The Cayman Islands, Hong Kong, Saudi Arabia, Taiwan, and Belgium with a combined 2.24 trillion. Total foreign holdings are 6.287 trillion dollars or 29.2% of our total debt. This leaves domestic buyers as the dominate holders of Treasury debt. With 15.172 trillion or 70.8% of the total. So it’s an assortment of institutional investors, pension funds, hedge funds, mutual funds etc., and individual Main Street investors who buy the rest.
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