Interest Rate Movements

Interest-rate movements are based on the simple concept of supply & demand. If the demand for credit (loans) increases, so do interest rates. When the economy is expanding there is a higher demand for credit so rates move higher, whereas when the economy is slowing the demand for credit decreases and so do interest rates.

OECD's CLI

OECD - Organisation for Economic Co-operation and Development

CLI - Composite Leading Indicator

* Designed to provide early signals of turning points between expansions & slowdowns of economic activity.

* OECD compiles CLIs for 29 member countries, 6 non-member economies, & 7 country groupings.

* The CLI comprises a set of component series selected from a wide range of key short-term economic indicators to ensure that the indicators will still be suitable when change in economic structures occur in the future.

* A common way to exploit CLI data is to take their YoY growth rate

* Releases are monthly, on the Friday of the first full week of the month, & refer to activity two months earlier (i.e. Jan's release reports leading indicators for Nov)

* The US has its own set of domestic leading economic indicators by the Conference Board, a business research group in NY (i.e. the Index of Leading Economic Indictaors)

Net Foreign Security Purchases (TIC)

Summarizes the flow of stocks, bonds, and money market funds to and from the United States (i.e. capital flow into US denomiated assets). The headline figure is the difference in value between American purchases of foreign securities and foreign purchases of American securities, expressed in millions of dollars. The Treasury International Capital or TIC statement is a major component of the American capital account and gives valuable insight into foreign demand for American investments and dollar.

A positive figure indicates that more capital is entering the US than leaving as sales of American securities to foreigners exceed American purchases of foreign securities. Positive figures suggest that American security markets are competitive with those of other countries.

Foreign security purchases are especially important in the case of a trade deficit, as a positive figure can offset the depreciating effect (on the USD) of a trade shortfall. A negative or declining TICS figure reflects a declining capital flow picture. Outflows are indicative of weaker demand for US assets which puts downward pressure on the value of the dollar.

TIC data breaks down investors into governments and private investors. Usually, a strong government holding of dollar denominated assets signals growing dollar optimism as it shows that governments are confident in the stability of the U.S. dollar. Most importantly seems to be the purchases of Asian central banks such as that of Japan and China. Waning demand by these two behemoth US Treasury holders could be bearish for the US dollar. As for absolute amount of foreign purchases, the market generally likes to see purchases be much stronger than the funding needs of that same month's trade deficit. If it is not, it signals that there is not enough dollars coming in to match dollar going out of the country. As a side note, purchases by Caribbean central banks are generally seen to be less consistent since most hedge funds are incorporated in the Caribbean. Hedge funds generally have a much shorter attention span than other investors.

Release Schedule: 9:00 AM (EST); monthly, in the second month following the reporting month

Revisions Schedule: Data are subject to revisions for 24 months following release

Source of Report: U.S. Treasury

Web Address: http://www.treasury.gov

Address of Release: http://www.treasury.gov/tic/ticsec2.html