It Wouldn’t Be TIC Without So Much Other

Picking up where TIC left off from December, when more indicated bad (tight money) than good (not as tight), January kind of reversed the balance. Maybe. The TIC figures are some of the noisiest high frequency data you’ll ever see, so any interpretations are immediately highly salted.

We had pointed out, for example, that US banks reported fewer of their own liabilities to foreigners in December; it had actually been a pretty steep decline.

That was reversed in January not unlike a slightly more reflation-y stand across global markets when compared to the prior month.

The 6-month cumulative, however, didn’t change a whole lot because, for now, the trend remains tipped toward official selling (dollar shortage, or why foreign central banks and governments always sell their UST’s when they are rising in value).

Private holders had put up for more US$ assets up to November after a hefty and concerning across-the-board decline in October. This overall monthly number contrasts with the more favorable official UST activity, for now just contributing more noise.

According to the report for January 2022, a chunk of those USTs must’ve been in and out; $46.8 billion deposited during December, then $28.7 billion removed in January, destination(s) unknown.

That still left a little less than $20 billion of the original deposit which I still believe might just be more Chinese than Russian.

In other words, nothing really changed here.

What’s been perhaps the clearest pure signal is US bank claims on other banks in Japan and across the Caribbean. While not completely free from short run noise, going all the way back to November 2020 there’s been less eurodollar activity (remember that lack of growth is itself a contraction, so an outright negative is doubly so) indicated by what’s going, or what’s not, into Japan and toward Emil’s palatial beachfront lair.

Both of those declined again pretty substantially during January.

Thus, from a very broad perspective, more had been less or tight than not over the final half of 2021 and beginning 2022.

Has the pre-crisis Eurobond securitization mechanism been that much restarted, or has the Treasury Department been that unable to track the deal-making until recently? There are no good answers, though this data (since mid-2018) does correspond to increased use across repo markets outside the US (and therefore potential for another collateral bottleneck).

In TIC’s dense jargon, these CLOs are

In addition to a flood of Eurobond CLO deals, apparently US banks have also reported a huge increase in liabilities due from their customers, not their own activities. It’s always hard to say for sure, but the TIC instructions indicate that most of this latter “other” is when US-domiciled bank customers go through US banks to borrow US$s from outside the country in one form or another (and US banks manage the liabilities).

Who else in the US must have been borrowing so much from outside?

Thus, for reasons unknown, this particular “other” has been largely responsible for most of the total increase for TIC red (chart immediately below; the one following shows bank liabilities excluding both of these others):

This is, as you can see, something new.

What’s the deal, and who’s making them? No idea, but what may be important is the sizable drop in the deal-making being managed by US banks on behalf of whomever during December, which was only partly retraced in January. A possible inflection?

We have to wonder if dollars became somewhat more difficult to borrow for whatever purposes since this was the same time when US$ curves really started to show strain. Or is this just more short run noise on top of the long run data noise?