Net foreign acquisition of long-term U.S. securities drops 95 percent in December
The Associated Press
Thursday, February 15, 2007
WASHINGTON
Net foreign acquisition of long-term U.S. securities was $2.5 billion (€1.9 billion) in December, down 95 percent from $52.2 billion (€39.74 billion) in November and the lowest monthly amount since July 2000, according to a U.S. Treasury Department report released Thursday.
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 $15.6 billion (€11.87 billion) in December, down 82 percent from $84.9 billion (€64.63 billion) in November and the lowest since January 2002, 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 showed a net foreign capital outflow of $11 billion (€8.37 billion) in December, a sharp reversal from the $70.5 billion (€53.67 billion) net monthly TIC inflow of the previous month.
Financial market analysts consider the monthly data from the Treasury Department to be a significant but imprecise measure of the ease with which the United States can finance its trade deficit. By comparison the United States had a $61.2 billion (€46.59 billion) trade deficit during December, according to a report earlier this week by the Commerce Department.
Within the long-term securities category, foreign net purchases of U.S. Treasury notes and bonds was $10.6 billion (€8.07 billion) in December, compared with net buys of $34.1 billion (€25.96 billion) in November.
Private foreign investors bought a net $4.6 billion (€3.5 billion) in Treasury notes and bonds in December, after making net purchases of $32.5 billion (€24.74 billion) the previous month. Meanwhile, foreign official institutions such as central banks bought a net $6.1 billion (€4.64 billion) of these Treasurys, compared with net purchases of $1.0 billion (€0.76 billion) the previous month.
Net foreign purchases of debt issued by U.S. government-sponsored agencies like Fannie Mae and Freddie Mac totaled $28 billion (€21.31 billion) in December, up from $15.8 billion (€12.03 billion) in net purchases in November.
For U.S. equities, net foreign sales totaled $11.6 billion (€8.83 billion) in December, a reversal from $7 billion (€5.33 billion) in net purchases the previous month.
For corporate bonds, net foreign purchases were $36 billion (€27.4 billion) in December, down from $65.4 billion (€49.78 billion) the previous month.
Net foreign equities and bonds purchased by U.S. residents — which affects the overall net inflow figure — was $47.4 billion (€36.08 billion) in December, up from November's $37.4 billion (€28.47 billion).
Total foreign holdings of Treasury bills, notes and bonds was $2.224 trillion (€1.69 trillion) at the end of December, up from $2.218 trillion (€1.69 trillion) the month before. But foreign official holdings of Treasury bills, notes and bonds fell to $1.318 trillion (€1 trillion) in December from $1.321 trillion (€1.01 trillion) the month before.
Japan remained the largest holder of U.S. Treasury securities, with its holdings rising $6.9 billion (€5.25 billion) in December to $644.3 billion (€490.45 billion).
China remained the second-largest holder of U.S. Treasurys, as its stake rose $3.1 billion (€2.36 billion) to $349.6 billion (€266.12 billion). Britain remained in third place with holdings up $16.5 billion (€12.56 billion) to $239.1 billion (€182.01 billion).
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