US investors repatriating funds back home?

Opinion pieces in the FT and WSJ have fuelled doubts on whether the Fed will be able to act on its hawkish talk and deliver rate hikes in the summer. The WSJ notes that this is unlikely to happen as the inflation outlook has not deteriorated significantly enough while
the FT notes division amongst Fed policymakers that would delay rate hikes. This together with well supported crude oil prices (ignoring Saudi Arabia’s decision to increase production) could keep the USD on a soft tone near-term.
However, analysts at BNP Paribas place particular emphasis on the US Treasury Flows (TIC) report, which showed that US residents were net sellers of foreign assets for the second consecutive month. In 2007, US households invested around USD 400bln abroad amidst an environment of risk appetite and a weak USD. But declining market prospects abroad lend support to repatriation that is already becoming evident in TIC data. This data should be watched in determining whether this is the start of a repatriation trend that would provide significant USD support.
Long term foreign private flows into US securities rebounded strongly to total USD 63.5bln in April from USD30.5bln last month, led by a strong USD58.0bln inflow in to US treasuries. Interestingly foreign private equity flows turned negative in April with an outflow of USD16.3bln. Although the overall data suggests a return of foreign investor appetite for US securities, the bias towards US treasuries and the outflow from equities implies that safe haven flows were still dominating the market at that time.
But, one sign that risk aversion may be abating was the rebound of inflows to corporate bonds which recovered to show an inflow of USD25bln in April following the near USD5bln of net selling in March.
It is interesting to note that portfolio inflows to the US from China have rebounded strongly once again in April, with overall inflows amounting to USD31.5bln, up from
USD17bln seen in March and maintaining an increasing trend of inflows from China that has developed over the course of the past six-months.
Moreover, there was also a massive jump in long term portfolio inflows to the US from the UK in the month of April to USD70.5bn from USD33.6bln in March, with a record USD48.5bln inflow to US treasuries.
If this renewed trend of portfolio inflows to the US from Asia and the Middle East is maintained in the coming months it could start to add credibility to the market suggestions that the US is gaining international support for its strong USD policy.