Foreign Buying of U.S. Securities Rises
Tuesday July 17, 12:53 pm ET
May Net Foreign Acquisition of U.S. Securities Rises to $112.6B
WASHINGTON (AP) -- Foreigners sharply increased their buying of long-term U.S. securities in May, as appetite for corporate bonds and equities surged.
Net foreign acquisition of long-maturity U.S. securities was $112.6 billion in May, up from $72.7 billion in April, according to a U.S. Treasury Department report released Tuesday.
Foreign buyers, on net, snapped up long-maturity securities across the board: Net buying of corporate bonds saw the biggest increase, rising to $72.6 billion in May, up from $33.5 billion in April.
Net purchases of U.S. equities likewise jumped in May, hitting $41.9 billion, up from $27.4 billion in April.
Drew Matus, an economist with Lehman Brothers, said the jump in stock and corporate bond purchasing likely indicated a bit more "risk seeking" on the part of foreign buyers.
Foreign net purchases of U.S. Treasury notes and bonds were likewise much stronger in May, rising to $21.6 billion from net buys of $376 million the month before.
China reduced its holdings of U.S. Treasurys to $407.4 billion from $414.0 billion, the second month in a row China has reduced its stake.
The dip in Chinese holdings may reflect "custodial practices," said Chris Turner, currency strategist at ING in London, who noted that Great Britain holdings jumped to $167.6 billion from $134.5 billion in the same month.
Still, Turner said further changes in Chinese holdings bear watching, as another dip "may add to fears that China is quietly finding more valuable investment products than U.S. Treasurys -- an activity that potentially accounts for some of the heavy (U.S. dollar) losses seen over recent weeks."
Private foreign investors bought a net $25.9 billion in Treasury notes and bonds in May, after making net sales of $9.0 billion the previous month. Meanwhile, foreign official institutions such as central banks sold a net $4.6 billion of these Treasurys, compared with net purchases of $9.4 billion the previous month.
The monthly Treasury report highlights cross-border acquisitions of securities with maturities of more than one year including non-market flows such as stock swaps and principal repayment on asset-backed securities.
Excluding such non-market flows, net buying of long-term U.S. securities would have totaled a record $126.1 billion in May, up from $80.3 billion in April, according to the monthly Treasury International Capital report, known as TIC.
The report's most comprehensive category, "monthly net TIC flows," includes non-market flows, short-term securities and changes in banks' dollar holdings. This measure of net foreign capital inflow was $105.9 billion in May, up from $97.8 billion the previous month.
Financial market analysts consider the monthly data from the Treasury Department to be a significant but imprecise gauge of how easily the United States can finance its trade deficit. The May TIC flow compares with the $60.0 billion trade deficit during the month, reported last week by the Commerce Department.
Net foreign purchases of debt issued by U.S. government-sponsored agencies like Fannie Mae and Freddie Mac totaled $27.5 billion in May, down from $36.1 billion in net purchases in April.
Net foreign equities and bonds purchased by U.S. residents -- which affects the overall net inflow figure -- was $37.3 billion in May, up from April's $17.1 billion.
Total foreign holdings of Treasury bills, notes and bonds was $2.183 trillion at the end of May, up from $2.167 trillion the month before. Foreign official holdings of Treasury bills, notes and bonds fell to $1.448 trillion in May from $1.458 trillion the month before.
Treasury holdings in Caribbean banking centers, which are associated with investment funds, plummeted to $48.0 billion in May from $76.5 billion the month before.
Treasury holdings by "oil exporters" -- a group mainly comprising the Organization of Petroleum Exporting Countries -- rose to $121.3 billion from $112.2 billion. South Korea's Treasury holdings fell to $52.1 billion from $54.1 billion.
The data, typically released around the 11th business day of the month, can be found on the Treasury's Web site at: treas.gov
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