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Strategies & Market Trends : Currencies and the Global Capital Markets

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To: Henry Volquardsen who started this subject	12/10/2001 5:34:35 AM
From: friverola	of 3536

Flow data remains USD supportive (BNP Paribas) Monday, December 10, 2001 September capital flow data for non-US accounts revealed that inflows into the US declined from USD36.52bn to a mere USD7.27bn, explaining why the USD has come under pressure. Detailed analysis of the flow data suggests that equity flows reversed from a USD9.4bn surplus to a USD9.57bn deficit in September. Treasuries also showed an outflow, but it is interesting to note that investment in agency and corporate bonds remained solid, indicating that capital outflows were limited to very liquid assets, or in the case of equities assets, associated with a high price risk. A further dis-aggregation of capital flows indicates that buying of US corporate bonds has been particularly strong from Europe, while US agencies have been preferred by Asian accounts. Agencies comprise a lower credit risk than corporate bonds, and since the yield differential to Japan is substantial, agency bonds are used by Japanese investors to establish carry trades. fxstreet.com

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