UPDATE: Foreign Demand For US Securities Grows In June
17 August 2009 - 4:38PM
Dow Jones News
Foreign demand for long-term U.S. financial assets grew in June,
according to a Treasury Department report released Monday that
shows that foreign investors are still snapping up U.S. bonds. At
the same time, China trimmed its holdings of U.S. Treasury
securities from $801.5 billion in May to $776.4 billion in June.
Meanwhile, Japan and the U.K. slightly boosted their holdings.
Overall, the monthly Treasury International Capital report,
known as TIC, shows that net foreign purchases of long-maturity
U.S. securities totaled $71.3 billion in June following sales of
$36.9 billion the month before.
"Purchases of Treasury securities were very strong in June due,
at least in part to the rise in yields that occurred early in the
month," said Wells Fargo global economist Jay Bryson in a research
note. "There is little evidence in recent TIC reports to suggest
that foreigner investors are growing weary of buying U.S.
securities."
The monthly Treasury report highlights cross-border acquisitions
of securities with maturities of more than one year including
non-market transactions such as stock swaps and principal repayment
on asset-backed securities.
The closely-watched figure excluding transactions that don't
occur on an open market recorded net buying of $90.7 billion in
long-term U.S. securities, after sales of $19.4 billion in May,
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 of net foreign
capital outflow was $31.2 billion in June, versus an outflow of
$65.7 billion the previous month.
Financial market analysts consider the monthly data from the
Treasury Department to be a significant but imprecise gauge of how
easily the U.S. can finance its trade deficit. The June TIC flow
compares with the $27.01 billion trade deficit during the month,
reported last week by the Commerce Department.
Within the long-term securities category, foreign net purchases
of U.S. Treasury notes and bonds was $100.5 billion in June,
compared with net sales of $22.6 billion in May.
Private foreign investors bought a net $77.6 billion in Treasury
notes and bonds in June, after selling $343 million the previous
month. Meanwhile, foreign official institutions such as central
banks bought a net $22.5 billion of these Treasurys, compared with
net sales of $21.8 billion the month before.
Net foreign purchases of debt issued by U.S.
government-sponsored agencies like Fannie Mae (FNM) and Freddie Mac
(FRE) totaled $5.1 billion in June, compared with a $12.8 billion
in purchases in May.
For U.S. equities, net foreign purchases totaled $19.1 billion
in June, compared with purchases of $16.7 billion the previous
month.
For corporate bonds, net foreign sales were $1.0 billion, versus
purchases totaling $927 million the previous month.
China, according to the June data, held on to its new title as
the largest holder of U.S. Treasury securities. China's holdings
totaled $776.4 billion, followed by Japan's $711.8 billion and the
U.K.'s $214.0 billion.
The TICs data, typically released around the 11th business day
of the month, can be found on the Treasury's Web site at:
http://www.treas.gov/tic. With each monthly release, Treasury
revises the previous month's data as well.
The next report, covering July, is scheduled for release on
Sept. 16.
-By Maya Jackson Randall, Dow Jones Newswires; 202-862-9255,
maya.jackson-randall@dowjones.com