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Strategies & Market Trends : World Outlook

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From: Don Green	10/24/2005 3:16:36 PM
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US Residents Shun Foreign Bonds while Foreigners Rush into US Corporates by Ashraf Laidi 10/18/2005, Forexnews.com Net foreign capital flows into the US rose 4% to $91.3 billion in August from a revised $87.5 billion in July (initial reading was $87.4 bln). This was the fifth monthly consecutive increase in net foreign inflows for the first time since the data have been available in 1988. Equally positive for the US dollar is that the capital flows have comfortably exceeded the $59 billion trade deficit for the month. The bulk of the continuous increase in foreign capital flows is largely related to corporate debt. US residents were net sellers of foreign bonds at $17 billion in August, the largest since the series were made available. That beat the previous record of $16 billion, which was during the LTCM crisis of October 1998 when US investors exited emerging market bonds. In contrast, foreigners increased their net purchases of US corporates by 62%. These two massive flows into US and out of foreign debt overshadowed significant declines of foreign flows in US stocks and agency bonds. (see below for reasons

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