an item:Foreign Demand for Long-Term U.S. Assets Weakens (Update2)
March 16 (Bloomberg) -- International demand for long-term U.S. financial assets fell in January, reflecting sales of corporate and government agency debt and China’s smallest net purchase since May.
Net sales of long-term equities, notes and bonds totaled $43 billion, compared with buying of $34.7 billion in December, the Treasury said today in Washington. Including short-term securities such as stock swaps, foreigners sold a net $148.9 billion, after net buying of $86.2 billion the prior month.
China, the U.S. government’s largest creditor, is “worried” about its holdings of Treasuries and wants assurances that the investment is safe, Premier Wen Jiabao said last week. President Barack Obama is relying on China to sustain buying of Treasuries amid record amounts of debt sales to fund a $787 billion stimulus package.
“There was a stampede by foreign investors to exit their U.S. dollar investments,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “Everyone wants to bring their money home. It’s not about return on capital. It’s whether you can get your capital back.”
Economists predicted international investors would buy a net $45 billion of long-term securities in January, based on the median of five estimates in a Bloomberg News survey.
International investors sold a net $8.4 billion in U.S. corporate debt in January, the report showed. Net foreign purchases of Treasury notes and bonds were a net $10.7 billion in January after buying of $15 billion a month earlier.
Agency Debt
Foreign demand for U.S. agency debt from companies such as Fannie Mae and Freddie Mac continued to slide, with net sales of $22.5 billion, the fourth straight month of selling.
Net foreign purchases of U.S. equities were $1.4 billion in January, after net purchases of $3.9 billion the previous month.
China remained the biggest foreign holder of U.S. Treasuries, after its holdings rose by $12.2 billion to $739.6 billion. That’s the smallest since a $4.8 billion increase in May. Japan, the second-largest holder, reported holdings rose $8.8 billion to $634.8 billion.
Some economists say the difference between the trade deficit and securities purchased by foreigners is an indicator of how easily the U.S. can finance its external obligations.
The U.S. trade deficit narrowed in January to $36 billion, the lowest level in six years, on tumbling American demand for everything from OPEC oil to Japanese automobiles, Commerce Department figures showed March 13 in Washington.
Caribbean banking centers, where many hedge funds are based, reduced their holdings of Treasury debt by $20.9 billion to $176.6 billion.
The Treasury’s reporting on long-term securities captures international purchases of government notes and bonds, stocks, corporate debt and securities issued by U.S. agencies such as Fannie Mae and Freddie Mac, which buy mortgages.
To contact the reporters on this story: Vincent Del Giudice in Washington at vdelgiudice@bloomberg.net
Last Updated: March 16, 2009 15:30 EDT |
