Japanese net buyers of foreign bonds last week, easing concern over US deficit
[to russ - I know I know - ggg]
Friday, October 15, 2004 2:34:16 AM
afxpress.com
TOKYO (AFX) - Japanese bought more foreign bonds than they sold last week, the Ministry of Finance (MoF) reported, easing concerns over whether a decline the previous two weeks marked the start of a worrisome trend
Japanese investors are a major force in the US government debt market, and their investment stance is closely watched for evidence of whether US Treasury yields and interest rates are likely to rise or fall due to the willingness of foreign investors to continue financing a large proportion of the US federal budget deficit
The US federal budget deficit widened to a record 413 bln usd in fiscal 2004, the Treasury Department announced overnight. Also overnight, the Commerce Department reported the US trade deficit widened to 54.0 bln usd in August, only slightly below the record 55.0 bln usd deficit set in June
Those trends fuel concern over whether the Japanese, one of the largest buyers of US debt, will keep buying US Treasurys if the US dollar begins to slide in value. The dollar fell against the yen in immediate reaction to news of the August trade deficit, which expanded 6.9 pct from a year earlier because of the surge in global oil prices. Analysts estimate 45 bln to 50 bln usd in foreign funds are needed each month to finance the US current account deficit, the broadest measure of the nation's global trade in goods, services and investment flows. MoF data released today showed Japanese investors were net buyers of 1.70 trln yen (15.54 bln usd) worth of foreign bonds in the past business week of Oct 4-8. Future data is likely to show the vast majority of that money was invested in US Treasurys, judging from past data
Japanese had been net sellers over the last two weeks of September, and data release on Thursday showed they were net buyers of only 117.6 bln yen worth of foreign bonds last month
This was down from a surprisingly large 2.69 trln yen in August. That was the highest monthly figure since May 2003, a month before the yield on the Japanese benchmark 10-year bond hit an all-time low of 0.41 pct, prompting Japanese institutional investors to look overseas for higher returns |
