JPM: Private Institutions Added Record Tsys In May On Short Cover

J.P.Morgan note that “this afternoon, Treasury released its monthly TIC data on foreign transactions and holdings of US securities for May, showing foreign investors purchased $99.9bn long-term Treasuries over the month. Notably, private institutions added $134.8bn Treasuries over the month, the most on record, while official institutions shed another $34.1bn, the fourth consecutive month of selling. Geographically, this demand was primarily driven by the Cayman Islands, with significant buying also from the UK, and likely reflected further short covering, as long-term yields briefly breached 3% early in the month, only to reverse lower. Outside of the robust demand from these two countries, foreign investors actually sold Treasuries on the month, which is consistent with our views: as we discussed recently, foreign demand is likely to remain muted in H222, and should keep bearish pressure on Treasuries, particularly in the intermediate sector. At the other end of the spectrum, we note that China accounted for the largest selling during the month, which is rather interesting in a month in which FX reserves actually increased.”