US net long-term TIC flows fell to $28bn in December, down from $220.2bn in the previous period.
This points to a sharp drop in net cross-border buying of long-term US securities during the month.
Dollar Outlook And Positioning
The sharp fall in foreign buying of long-term U.S. assets in December 2025 is a key warning sign for the dollar. Flows dropped from more than $220bn to just $28bn, showing weaker global demand for U.S. securities. This could support short-dollar trades, including put options on dollar-tracking ETFs.
Lower foreign demand can push U.S. Treasury yields higher, because rates may need to rise to attract buyers. Last week’s 10-year note auction hinted at this, with weaker foreign participation and a higher yield. Traders may want strategies that benefit from falling bond prices, such as puts on Treasury bond ETFs like TLT.
A flow shock like this often comes before higher market volatility. The VIX is trading near 14.5, which may not fully reflect the new risk. This may create an opening to buy VIX call options or take long-volatility positions on major indices.
Equity Risk And Hedging
This setup is similar to the capital outflows seen before the late-2023 equity drop, when foreign selling came ahead of weaker stock prices. The S&P 500 is up nearly 4% year to date, but support from foreign investment now looks less reliable. Consider protective puts on indices like the SPX or QQQ to hedge against a possible pullback in the weeks ahead.
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