J.P.Morgan Expect Foreign Private Demand To Remain Relatively Firm

On March's TIC flow data, released late Monday, J.P.Morgan note the data showed "foreign investors bought $118.9bn long-term Treasuries over the month, the largest monthly demand on record. This demand is nothing short of impressive, knowing that 10-year yields rose 30bp over the month of March. Breaking down the data, private investors added $71.1bn over the month, the largest net purchase since May 2017, and official investors bought $47.8bn, the strongest monthly demand since January 2013. Interestingly, the official demand was a mirror image of activity at the front end, as they sold $45.6bn in T-bills over the month: the stock of outstanding T-bills declined $190bn over the month, the largest drawdown since April 2014. We think these flows could represent extension as official investors allowed their T-bills to mature and moved into higher yielding alternatives at the front end of the curve, reflecting relatively elastic demand."

• "Geographically, the strongest demand came from China, accounting for almost a third of total buying in March, and also the strongest monthly demand since January 2013. Meanwhile, the Cayman Islands added $34.9bn long-term Treasuries over the month, reversing a small portion of the $111bn they sold over the first two months of the year. Accordingly, this likely reflects short covering from hedge funds as yields moved aggressively higher over the month. Looking ahead, we expect foreign private demand to remain relatively firm, as relative valuations appear attractive compared to home-currency government bond yields on a short-term FX-hedged basis."