Net TIC inflows into the US fell to $83.7 billion in July from $135.5 billion in June. Breaking down the transaction structure, foreign investors net bought $38.8 billion in Treasury bills but net sold approximately $3.6 billion in medium- and long-term US Treasuries, resulting in a net purchase of approximately $35.2 billion in US Treasuries. This indicates that overseas demand remains, but there is a preference for shorter-term, less volatile Treasury bills, rather than prematurely taking on the risks of inflation, fiscal supply, and term premiums associated with longer-term Treasuries. The internal structure also shows divergence: private funds net sold $29.1 billion in medium- and long-term US Treasuries, while foreign official institutions net bought $25.5 billion, with central bank funds still providing some stabilizing demand. After the Fed's rate hike, the yield curve flattened, with the 2-year yield being significantly more impacted than the long-term yield, but the 10-year yield still returned to around 5%, indicating that the rate hike temporarily stabilized inflation expectations but did not address the supply pressure on the long-term side.
